Leaving aside sectors in which the licensing of investment is conditional or in which investment will not be licensed, an investor may on its own initiative select investment projects, investment partners, the locality, the duration of investment, the markets for the sale of products and its charter capital contribution proportion in accordance with the provisions of the Law on Investment and other related legal instruments.
Also, the investor may generally decide on the form of investment. However, a number of investment sectors that are unconditional for Vietnamese enterprises but conditional for FIEs (e.g. exploitation and processing of mineral resources, and investment in the fields of import, export, trading and distribution etc.). The Law on Investment and Decree 108, provide for such list of investment sectors, however, relevant sectoral legislation shall provide for what form of "conditions" that an FIE is required to meet.
In certain industries, this may mean that the FIE may only operate in the form of a foreign-invested JVE with a majority or minority participation of a Vietnamese enterprise. In other sectors, FIEs operating in conditional investment sectors may nevertheless operate as 100% FOEs but meet certain conditions such as their capital structure, project-specific experience and so forth...
Annually, the Ministry of Planning and Investment publishes a list of national projects calling for foreign investment capital. Ministries, branches and provincial People's Committees also publish such lists of projects for their respective industries and localities. In principle, the projects included in those lists are regarded as complying with current planning.
Project classification and licensing bodies
The authority to approve investment projects is currently divided amongst (i) the Prime Minister of the Government (PM) with the scope of approval is limited to the "investment policy", (ii) the People's Committees in the provinces and cities under the central State administration (PC), and (iii) the management boards of industrial zones, export processing zones, high-tech zones and economic zones in the provinces and cities under the central State administration (MB).
The hierarchy of the investment approval and licensing authority is as follows:
Projects regardless of capital source or capital amount within specific sectors (airports, seaports, mining, oil & gas, TV broadcasting, casinos, cigarette manufacturing, universities, development of IZs, EPZs, HTZs and ECs ("Zones").
- Projects regardless of capital source with capital amount over VND1,500 billion within specific sectors (electricity, metallurgy, alcohol & beer production, trading etc.)
- FDI projects regardless of capital amount within specific sectors (sea transportation, post, telecom & internet networks, printing etc)
People's Committees in provinces and cities
- Projects outside Zones and not within PM approval authority
- Projects for development of infrastructure in Zones in localities with no MA
Management boards of industrial zones
- Projects in Zones and not within PM approval authority
- Projects for development of infrastructure within their own zones
All investment certificates (previously called "investment licences") are now issued by other the relevant PCs or MBs. However, in specialized sectors such as banking or insurance, the relevant line ministries are still empowered with the approval and licensing authority as previously were.
Recommended and restricted sectors of investment
The Government of Viet Nam encourages foreign investors to invest in the following sectors and regions:
- Manufacture of new materials and production of new energy, manufacture of high-tech products, biotechnology, information technology and mechanical manufacturing;
- Breeding, rearing, growing and processing of agricultural, forestry and aquaculture products, production of salt, creation of new plant and animal varieties;
- Utilization of high technology and advanced techniques, protection of the ecological environment and research, development and creation of high-technology;
- Labour intensive industries;
- Construction and development of infrastructure facilities and important industrial large-scale projects;
- Professional development of education, training, health, sports, physical education and
- Vietnamese culture;
- Development of traditional crafts and industries and zones.
From time to time, the Government issues detailed lists of sectors and regions in which investment is entitled to incentives, thus setting out the prerequisite requirements investors need to adhere to be entitled to investment incentives and certain benefits. The new Law on Investment only sets out generally which sectoral and/or geographic areas are entitled to investment incentives.
The types of incentives and their extent (e.g. tax holidays or reductions, exemption from land fees) are governed by the specific tax, land and other specific regulations. Viet Nam and Italy signed the Investment Promotion and Protection Agreement since 18 May 1990, quite early as compared to other countries. In other fields, also as published by the Government, foreign investment will not be licensed or only licensed under special conditions. For sectors in the List of Conditional Investment Sectors, the investment is subject to certain conditions, which include: television, production and publishing cultural products, telecommunication, and transportation by all means, cigarette production, exploring and processing natural resources, real-estate business, education, medical services, distribution.
These conditions may take the form of certain requirements for the establishment of a company, the scope of operations available for the project, the foreign and domestic ownership structure of the project, the applicable form and type of legal entity available for the investment project, certain business conditions and largely depend on Viet Nam's international concessions and policy to open its market to foreign investors in a number of sensitive sectors.
Foreign investment is only allowed by means of contractual cooperative operation in the following sectors: telecommunications services; domestic and international post delivery; journalism and publishing; radio and television networks.
Foreign investment is only allowed by means of contractual cooperative operation or joint venture in the following sectors: petroleum, mining and processing rare minerals; air freight, railroad transport and ocean carriage; bus transport; construction of seaports and airports (excluding investment projects such as BOT, BTO and BT); ocean shipping and air flight services; culture; forestation; production of industrial explosives; tourism; consulting services (excluding technical consulting services).
Foreign investment in processing and development of raw materials is tied in the following sectors: production and processing of dairy; production of plant oils and cane sugar; processing of timber (excluding investment projects involving imported timber).
Import and export, domestic distribution, high sea fishing, and development investment projects are subject to the approval of the Prime Minister.
Foreign investment is prohibited if it threatens; national security, national defense and public interests; damages Vietnamese historic relics, culture, traditions and customs; damages ecological environment; uses imported toxic wastes; produces toxic chemicals or uses toxic substances banned by international conventions.
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