Nghiên cứu Luật Doanh nghiệp

Like most of the world, Vietnam is actively competing for foreign investment (FDI).  Recently, there is a bad news/good news story on this in Vietnam.  Whether the story is good or bad depends on which side of the table you are sitting on.  First, any fair observer has to admit that Vietnam has done much over the last several years to improve itself as an attractive location for someone to relocate a factory, open a company or in general invest.  When President Clinton lifted the Trade Embargo with Vietnam in 1994, Vietnam was in many ways like the American Wild West in terms of infrastructure, law, regulation and many other factors – that is to say there wasn’t much infrastructure and there wasn’t much meaningful law on business.  What law and regulation there was usually turned out to be more applicable to Socialist operations and highly costly and time consuming to investors.  Because of the hype on Vietnam as being the next “Asian Tiger”, investors were oftentimes too quick to reach for their wallets and the net result was that a lot of money, time and goodwill was lost by most if not all investors.

        By 2003, many of the negative factors are changing.  First, internationally, every nation in Asia is competing for foreign investment and this is good news for people considering moving a factory, opening an office or sourcing products.  In Vietnam, the quality of infrastructure in major cities today such as Hanoi and Ho Chi Minh City is vastly improved.  Power outages still occur but the privations of life ten years ago are largely gone.  Good restaurants, well stocked supermarkets, cheap household help, strong international schools and a reduced bureaucracy all are making Vietnam more interesting as a site to start a business.  These changes aren’t yet countrywide.  In the countryside, infrastructure still has much to be improved and investors need to fully be aware of this.  Power outages are common.  Water stoppages frequent and all of this can effect your bottom line.  Industrial parks are, however, now more widely dispersed and although many of these are more visible on paper than based on their completed infrastructure admittedly the choice is much broader now throughout the country than before.

        Recently in a move to further entice foreigners to bring their money to Vietnam and invest in factories, Vietnam loosened central control of approval of investment licenses.  Now new factories need not solely pass through the Ministry of Planning and Industry (MPI) in Hanoi but investors may go directly to the local level and file the forms to start a business and invest there.  Additionally, the central government is talking about further reforms such as possibly opening up the stock market to 100 percent foreign owned companies, further freeing up hiring of engineering and senior managers and possibly even giving foreign firms the right to mortgage their assets.  The Ministry knows that competition for foreign investment is intense throughout the region and has even discussed possibly lowering land rental fees for foreign companies (currently land rental fees for local investors are 40 percent less than those for foreigners).

       The above is all good news for investors.  Although many of the changes under discussion are still a ways off, the change to allow investors to by-pass the MPI and go directly to the local level removes one layer of bureaucracy, a layer of chance for the diversion of funds and the delay in getting a project started.  Even with these changes, however, much remains to be done and action not words will be what investors will be judging Vietnam on in the long run.  To paraphrase Lenin “foreign investors will be “voting with their feet” to either pass Vietnam by or to stop and invest if the investment climate is right.

       As in China, Vietnam recognizes three types of typical business organization for a foreign company.  These are thee representative office, thee joint venture or thee one hundred percent (100%) foreign owned enterprise.  As in China, our company has had experience with all three forms.  Based on this experience, we feel that as in China the time of representative offices is long past.  We also recommend staying away from joint ventures as we believe the lack of control, problems with the law protecting minority equity participants, weak rule of law and corruption generally make a joint venture not worth the future potential problems.  We therefore recommend the one hundred per cent (100%) foreign owned enterprise which can be formed relatively quickly in Vietnam by applying for an investment license.  Such an application requires the following:

  • a filled-out application form for the investment license
  • The charter of the enterprise
  • The statements certifying the legal status and financial capacity of the foreign investor
  • The economic-technical explanatory statement (similar to a business plan).
  • Other files stipulated in the law

       Duration of a one hundred per cent foreign owned enterprise can be up to 50 years and this duration must be set out in the charter.  The government can grant extensions to this period but these can not exceed 70 years at this point.

       As investors looking for a site to locate their investment often look at Vietnam, Thailand and China in making a decision, we have listed all three countries below with our view of each country’s relative strengths and weaknesses as a site to locate a factory or to start and open a new business.  For Thailand, we have used Thailand’s Board of Investment, Zone 3, specifically the area around Rayong and the Eastern Seaboard.  Bangkok and its suburbs are usually not as cost competitive unless an operation requires highly technical or artistic skills which tend to be found more abundantly in Bangkok and the area immediately around the city because of Thailand’s relatively longer experience with foreign investment.
 Cost Comparison for Vietnam, Thailand and China


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