b. Protection of intellectual property rights
While the Foreign Investment Law only protects the industrial property rights of foreign investors and ensures their legitimate interests in technology transfer activities in Vietnam, the 2005 Investment Law has made a big step forward in protecting intellectual property rights. Accordingly, in addition to industrial property rights, foreign investors are also protected in terms of copyright, rights to plant varieties and breeding materials. The Law also stipulates that it will protect the legitimate interests of investors in technology transfer activities in Vietnam, but must comply with the provisions of the law on intellectual property and other relevant provisions of law.
c. Market opening, trade-related investment
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This is a new provision of the 2005 Investment Law compared to the 1996 Foreign Investment Law and the 2000 Law amending and supplementing a number of articles of the Foreign Investment Law to create consistency with the provisions of international treaties to which Vietnam is a member. The specific content of market opening and investment related to trade is stipulated in Article 8 of the LOI.
d. Transferring capital and assets abroad
The Law on Investment adds amounts related to intellectual property and investment liquidation to the list of amounts that investors are allowed to transfer abroad after fulfilling their financial obligations to the State.
For foreigners working in Vietnam for investment projects, they can transfer their legal income abroad after fulfilling all financial obligations to the state, not after paying income tax according to the law as prescribed in the 1996 Law on Foreign Investment.
In addition, the LDT also stipulates that the transfer of capital and assets abroad by investors and foreigners working in Vietnam must be made in freely convertible currency at the exchange rate at a commercial bank selected by the investor in accordance with the law on foreign exchange management.
e. Investment guarantee in case of changes in laws and policies
Both the Law amending and supplementing a number of articles of the 2000 Law on Foreign Investment and the LOE mention ensuring the rights of investors in case of changes in laws and policies, but the LOE has removed the provision that investors can be exempted from taxes in case these changes cause damage to the interests of foreign-invested enterprises and parties participating in joint venture cooperation contracts.
f. Dispute Resolution
According to Article 24 of the 1996 Law on Foreign Investment, disputes arising between parties to a business cooperation contract or between parties to a joint venture, as well as disputes between foreign-invested enterprises, parties to a business cooperation contract with Vietnamese enterprises must be resolved first by conciliation and negotiation. If the parties cannot reach a settlement, the dispute will be brought to arbitration or a court in Vietnam. Parties to a joint venture or business cooperation contract may agree in the contract to select another arbitration organization to resolve the dispute. For BTO, BOT, and BT contracts, disputes arising shall be resolved in a manner agreed upon by the parties in the contract.
According to the Law on Investment, conciliation and negotiation are not mandatory. Parties involved in disputes arising in the process of foreign direct investment can resolve disputes through: negotiation, conciliation, Vietnamese Court, Vietnamese arbitration, foreign arbitration, international arbitration, arbitration agreed upon by the disputing parties. Clearly, the provisions on dispute resolution are much more open than the 1996 Law on Foreign Investment.
3.4. Regarding investment fields, locations, incentives and support
Similar to other regulations, the Investment Law 2005 provides incentives, encouragement, and equal investment support for domestic and foreign investors specifically as follows:
a. Regarding investment fields and locations
The LDT replaces the phrase "incentive investment sectors and areas" in Article 3 of the 1996 Law on Foreign Investment in Vietnam and the 2000 Law on Amendments and Supplements to "incentive investment sectors and areas".
- Regarding investment incentives
The Law has removed the export production sector and the raw material processing sector and the effective use of natural resources in Vietnam from the list of investment incentive sectors. The Law also changed and supplemented the sector of “construction of infrastructure and important industrial production facilities” in Clause d, Article 3 of the 1996 Law on Foreign Investment to “construction and development of infrastructure, important and large-scale projects” in Clause 5, Article 27 of the Law.
In addition, the LDT also adds a number of completely new investment incentive sectors, namely:
- Production of new materials, new energy; production of high-tech products, biotechnology, information technology; mechanical engineering.
- Salt making; production of artificial seeds, new plant varieties and animal breeds.
- High technology incubation.
- Developing education, training; healthcare; physical education, sports and national culture.
- Developing traditional industries and professions.
- Other production and service sectors need to be encouraged.
These amendments and supplements are reasonable and necessary in the new socio-economic conditions with the development and dominance of science and technology, with international economic integration between countries, with the economic integration policy of the Party and State.
- About preferential investment locations
According to Article 28 of the LDT, preferential investment areas include:
- Areas with difficult socio-economic conditions, areas with economic conditions
- particularly difficult society.
- Industrial parks, export processing zones, high-tech zones, economic zones.
Thus, compared to the Law amending and supplementing a number of articles of the Law on Foreign Investment in Vietnam in 2000, the Law on Investment has provided additional incentives for investors investing in industrial parks, export processing zones, high-tech parks, and economic zones.
b. On investment incentives
Provisions related to incentives on corporate income tax, import and export tax, tax on profit transfer abroad, etc. are referred to relevant tax laws such as the law on corporate income tax, the law on import and export tax, etc., but do not specifically stipulate the tax rate to be paid for each case as in the Law on Foreign Investment in Vietnam in 1996 and the Law amending and supplementing a number of articles of the Law on Foreign Investment in Vietnam in 2000.
c. On investment support
While the 1996 Law on Foreign Investment and the 2000 Amendment and Supplement Law only have one single provision on investment support, which is "The Vietnamese Government guarantees to support foreign currency balance for infrastructure construction projects and some other important projects", the 2005 Investment Law has a whole section on investment support, including: Support for technology transfer; support for training; support for investment and development of investment services; support for investment in building infrastructure for industrial parks, export processing zones, high-tech parks, and economic zones.
3.5. Investment procedures
The new point of the Investment Law and Decree 108/ND-CP is to strongly decentralize the provincial People's Committee and the Management Board of Industrial Parks, Export Processing Zones, High-Tech Parks and Economic Zones (hereinafter referred to as the Management Board) to issue Investment Certificates as well as manage investment activities, while reducing the number of projects that must be submitted to the Prime Minister. If submitted, the Prime Minister will only approve in principle a number of important projects that are not yet included in the planning or do not have a planning. For projects that are included in the approved planning and meet the conditions prescribed by law and international treaties, the provincial People's Committee and the Management Board will issue Investment Certificates without
must submit to the Prime Minister for decision on investment policy. The remaining projects will be decided by the Provincial People's Committee and the Management Board and granted Investment Certificates.
For investment projects that are not included in the planning approved or authorized by the Prime Minister or projects that do not meet the market opening conditions stipulated in international treaties to which Vietnam is a member, the investment certificate granting agency shall preside over and consult with the managing ministries, branches, the Ministry of Planning and Investment and relevant agencies to submit to the Prime Minister for decision on adjustment and supplementation of the planning or decision on market opening. For investment projects in areas where there is no planning, the investment certificate granting agency shall consult with relevant agencies to submit to the Prime Minister for decision on the investment policy.
The new point of the Law is that investment procedures are designed to be simple and convenient for investors. Accordingly, foreign investment projects are divided into two types: investment registration and investment appraisal.
For foreign investment projects with capital scale of less than 300 billion VND and not in the conditional investment sector, investors only need to register for investment according to the form to be granted an Investment Certificate within 15 days from the date of receiving a valid registration.
Projects subject to appraisal apply to both domestic and foreign investment. Accordingly, projects in the List of conditional investment sectors or projects with capital scale of 300 billion VND or more must go through investment appraisal procedures. The appraisal content only includes:
- Conformity with technical infrastructure planning, land use planning, construction planning, mineral use planning and other resources;
- Land use demand;
- Project implementation progress;
- Environmental solutions.
For projects in the list of conditional investment sectors, only the conditions that the project must meet will be examined.
The Investment Law stipulates that foreign investors investing in Vietnam for the first time must have an investment project. In case an economic organization has been established but there is a need to carry out a subsequent investment project, there is no need to establish a new economic organization. For domestic investment, when establishing an economic organization, there is no need to have a project. This is the difference between domestic investment and foreign investment, this difference is necessary because foreign investment must follow the market opening roadmap in international treaties of which Vietnam is a member.
In order to implement administrative reforms in investment activities, the Decree stipulates that in case an investment project is associated with the establishment of an economic organization, the investment procedures are carried out simultaneously with the business registration procedures. The Investment Certificate includes the business registration contents as prescribed by the Law on Enterprises. In this case, the Investment Certificate is also the Business Registration Certificate and is also sent to the business management agency for general management of business registration.
Regarding the adjustment of investment projects, the LĐT and Decree 108/NĐ-CP stipulate that when adjusting investment projects related to the objectives, scale, location, form, capital and implementation period of the investment project, investors must complete procedures at the dossier receiving agency to complete procedures for adjusting the Investment Certificate. The adjustment of investment projects is carried out according to the procedures for registering investment project adjustments or examining investment project adjustments.
3.6. State management of foreign direct investment
LĐT and Decree 108/ND-CP specifically stipulate the powers and responsibilities of each state management agency on investment of the Ministry of Planning and Investment, Ministry of Finance, Ministry of Natural Resources and Environment, Ministry of Science and Technology, Ministry of Construction, economic and technical ministries, branches, Provincial People's Committees and Management Boards, in which the role and responsibilities of the Provincial People's Committee in managing investment activities are especially emphasized. The Provincial People's Committee is a central administrative unit in the locality, the Provincial People's Committee will perform the function of comprehensive management of the socio-economic development of the locality.
localities, including the issuance of investment certificates and management of investment activities in the area.
Along with strong decentralization to the Provincial People's Committees and Management Boards, the state management function of the Ministry of Planning and Investment mainly focuses on the work of formulating legal policies, monitoring, inspecting, supervising and supporting investment activities, presiding over the implementation of investment promotion activities on a national scale, presiding over coordination and participating in drafting international treaties related to investment activities; organizing training activities, fostering professional skills, and enhancing investment management capacity for investment management agencies at all levels.
II. Current status of foreign direct investment in Vietnam
1. Current status of foreign direct investment in Vietnam before July 2006
1.1. Period 1975 – 1987
During this period, Vietnam mainly implemented a policy of expanding foreign relations with socialist countries. Therefore, foreign direct investment activities have just begun to be implemented between socialist countries, and a number of FDI projects have appeared. These investment projects operate in Vietnam mainly in the form of joint ventures between socialist countries and the Socialist Republic of Vietnam. The most notable project during this period was the Vietnam-Soviet oil and gas exploitation project signed in 1980 between the Government of the Socialist Republic of Vietnam and the Soviet Union on cooperation in conducting geological exploration and oil and gas exploitation on the southern continental shelf.
1.2. Period 1988 – 1996
It can be said that this is the opening stage for foreign direct investment in Vietnam, and at the same time, the first stage in which we implement the provisions of the Foreign Investment Law. However, due to many limitations in the provisions of the Foreign Investment Law as well as changes in socio-economic conditions, we are in a state of both going and finding our way. Policy mechanisms must change continuously to
adapt to new conditions. However, we have also attracted more than 29 billion USD of foreign direct investment with a total of 1,992 projects.