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Business Customs

Background: Vietnam is a markedly Confucian society and its business practices are often more similar to those of China, Japan and Korea than to those of its Southeast Asian neighbors. The social dynamics and world-view of Vietnam’s society are reflected in the business climate including such matters as: “face,” consensus building, and the zero-sum game assumption.

1. Statutory requirements

A newly established company is required to appoint a chief accountant, who meets the qualifications prescribed under the Accounting Law, within the first fiscal year. During this period, a qualified accountant appointed by the FIE shall be responsible over all accounting activities. All Fies operating in Vietnam are required to apply the Vietnamese Accounting Standards and System (VAS) as statutory financial reporting framework. Provided the VAS is applied without modifications, the registration for the use of VAS with the MoF is not required.

Introduction

Several general principles are important for effective management of intellectual property rights in Vietnam. First, it is important to have an overall strategy to protect IPR. Second, IPR is protected differently in Vietnam than in the other countries. Third, rights must be registered and enforced in Vietnam, under local laws. Companies may wish to seek advice from local attorneys or IP consultants.

Ensuring formal property rights are fundamental. Effective administration of land is put of that. If formal property transfer is too costly or complicated, formal titles might go informal again. Doing Business records the full sequence procedures necessary for a business to purchase a property from another business and transfer the property title to the buyer’s name. In the past 6 years 105 economies undertook 146 reforms making it easier to transfer property. 

In many economies, especially developing ones, complying with building regulations is 90 costly in time and money that many builders opt out. Builders may pay bribes to pass inspections of simply build illegally, leading to hazardous construction. Where the regulatory burden is large, entrepreneurs may tend to move their activity into the informal economy. There they operate with leas concern for safety, leaving everyone worse off. 

Stronger investor protections matter for the ability of companies to raise the capital needed to grow, innovate, diversify and compete. This is all the more crucial in times of financial crisis when entrepreneur must navigate through defiant environments to finance their activities. Using 3 indices of investor protection, Doing Business measures bow economies regulate a standard case of self-dealing, use of corporate assets for personal gains. 

Selection of an investment project

Based on the socio-economic development planning and orientation for each five year period, the Ministry of Planning and Investment issues a list of: (i) specially encouraged investment projects; (ii) encouraged investment projects; (iii) geographical regions in which investment is encouraged; (iv) sectors in which the licensing of investment is conditional; and (v) sectors in which investment will not be licensed.

Methods of Payment

Most foreign firms exporting to Vietnam conduct business on a documentary basis and use various methods of payment, such as letters of credit (L/Cs), drafts and wire transfers. All foreign businesses dealing with Vietnam should insist on using confirmed, irrevocable L/Cs when initiating relationships with new importers and distributors. Vietnamese companies often will resist the use of confirmed L/Cs, because of the additional cost and collateral requirements required by Vietnamese and international banks.

Through two sets of indicators, Doing Business assesses the legal rights of borrowers and lenders with respect to secured transactions and the sharing of credit information. The depth of credit information index measures rules and practices affecting the coverage, scope and accessibility of credit information available through either a public credit registry or a private credit bureau. Credit information systems mitigate the 'information asymmetry’ in lending and enable lenders to view a borrower’s financial history (positive or negative), providing them with valuable information to consider when assessing risk.