1. Do not compensate anyone for promises – compensate them only for provable performance.
2. Do not assume that either the laws or regulations presently in effect in Vietnam will not be changed to your detriment before and/or after a project is started or completed.
3. Do not assume that even seemingly inconsequential failure(s) to comply with the laws and/or regulations of Vietnam will not cause you to face a possible loss or forfeiture of your investment in a project.
4. Do not assume that all Vietnamese you deal with will have the same concept of fairness and fair dealing that you might or would expect to find in other foreign countries.
5. Be prepared for laws and regulations that are incomplete, ambiguous and subject to different conflicting interpretations by different government agencies.
6. Corruption is a fact of life at many levels of Vietnamese governmental bodies and business. You must learn in advance how to deal with it and how to avoid getting caught in the crossfire of competing demands. Persons convicted of corruption are now being sentenced to death or to long prison terms.
7. If you are to have a Vietnamese partner, make sure the partner is responsible–ethically, morally and financially and spare no effort and costs in determining such before you sign or agree to anything with such partner.
8. Do not fail to provide for the possibility that if the project requires more equity or debt financing and/or guarantees than the parties originally provided for, and the Vietnamese joint venture partner is not able to put up his share of the additional funding or guarantees required that there is a provision adjusting upward your equity interest and/or your profit participation if you are required to provide or cause to be supplied the additional equity, debt or guarantees.
9. Do not leave anything essential to the success of the transaction to trust me, and do not be intimidated by cries the agreement is too long or too complicated. The guiding principal must be: does the agreement adequately and clearly include all of the protective provisions it should for your investment and have all of the possibly adverse consequences that can flow from something going wrong in the transaction been anticipated and properly dealt with?
10. From the inception of your arrival in Vietnam, use a very good, experienced lawyer and make sure that he or she is backed up by a good law firm.
11. Similarly, use a very good accountant backed up by a good accounting firm.
12. Do not assume your Vietnamese counterparts will use a lawyer or one familiar with Western ways of doing business and do not allow yourself to be intimidated by their not doing so or by their unhappiness that you are using a lawyer, unless you want your investment to become a charitable case.
13. No matter how well Vietnamese government officials or businessmen appear to speak or understand English, do not assume that they understand you or that you understand them. The same applies to translators.
14. Do not assume that Vietnamese government officials or businessmen understand Western ways of doing business or Western business concepts. The same applies to translators.
15. Insist on full accountability and current reporting of financial and business developments related to the project.
16. Insist on strict inventory controls to monitor and prevent possible improper diversion of capital equipment, inventory, production or products to the detriment of the project and/or to the personal benefit of executives and/or employees of the project.
17. Obtain in advance all the governmental and non-governmental approvals you can anticipate will be required and such assurances as can be reasonably obtained from the highest possible level of the government that the terms and conditions of your investment (including taxes, duties, import and export quotas etc.) are not only approved but will not be changed without your consent. The higher you go, the more insurance your project should enjoy.
18. Make sure the Investment License granted sets forth unambiguously all of the approvals and incentives you require for the operation of your business and do not hesitate to appeal if the terms of the Investment License fall short of those you requested in your investment application.
19. Do not think for one minute that any and all approvals from the national government will open the door to your doing business in any of the provinces of Vietnam. You must be prepared to and must make sure that you have in hand all of the necessary permits from the provincial and local authorities that are required for the project and obtain them coordinate with your obtaining approvals from the national government.
20. Do not make any significant investment in or in connection with the project until you know for a fact that all governmental approvals have been obtained in the form and substance required from the proper governmental agencies and signed by the proper and duly authorized officials and stamped, dated and assigned a reference number.
21. Do not purchase, lease or rent out property (commercial or residential) unless you are certain that the party selling, leasing or renting the property to you has the full authority of the government to do so that the terms and the conditions of the lease will be honored by the government. Also, be sure to obtain evidence (after each payment and before the next payment is due) that whatever portion of the payments which are required to be paid to the government are in fact paid to it.
22. Make sure that all construction projects, plant and equipment built, purchased or brought into Vietnam are guarded 24 hours a day, 7 days a week.
23. Insure with reputable and responsible insurance underwriters the project investment from day one and make sure the coverage is as broad, deep and intelligible as possible.
24. Obtain, if possible, the most comprehensive business interruption insurance.
25. Since the Vietnamese legal system is in its infancy, there is as yet no commercial code, no body of law and judicial precedents familiar to Western investors, and the few Vietnamese who may be involved in the implementation of the legal system do not, for the most part, have what we would regard as the proper background and training to decide commercial disputes, arbitration should be provided for in any agreement.
26. At this point in time, arbitration in a foreign investment transaction outside of Vietnam is probably far more preferable than arbitration in Vietnam. Particularly if the arbitration is to take place in Vietnam, but, in any case, try to designate in advance who the arbitrator(s) (and even their successors, if the originally designated arbitrators cannot serve or are unavailable) are going to be. The larger the transaction, the more important this is. Also, all such arbitration provisions in a foreign investment transaction have to be approved by the Ministry of Planning Investment (the MPI) or the Prime Minister’s Office, and they may not do so.
27. In fixing the forum for arbitration (if outside of Vietnam), make certain the award will be enforceable in Vietnam.
28. Make sure that the law to govern disputes in a transaction is clearly set forth in the joint venture agreement and the application and effect of conflicts of laws rules are fully taken into account.
29. Be aware that parties to contracts in Vietnam can agree to apply foreign law to deal with issues not yet provided for under Vietnamese law, provided such agreement is not inconsistent with any provision of Vietnamese law.
30. The method and procedures by which disputes will be resolved, when and if they arise, must be set forth in precise detail in the joint venture agreement as must the procedures for selecting the arbitrators.
31. There must be no ambiguities in any language in any document and there should be no agreements to agree.
32. Agree on all of the essential terms of the transaction now. Do not think that after the honeymoon is over (after the agreement is executed) that any other party will agree to anything without a possibly painful price being exacted from you, and the project’s future and your investment possibly being severely jeopardized.
33. If your government offers foreign investment insurance, purchase an amount adequate to cover your investment before you make the investment.
34. Select tough, experienced Asian smart management people for your project. Doing business in Vietnam is so complicated that the educational experience can be costly. It is not a place for beginners or weaklings.
35. Make sure you have obtained every possible tax exemption and tax benefit available to your investment and project under Vietnamese law in proper documentation from the appropriate national and local governmental agencies before you make the investment.
36. Oral agreements and oral promises are generally notoriously unreliable anywhere in the world. If any agreement not in writing signed by all the parties, forget about it!
37. Do not rely on written or oral representations of real or personal property ownership rights or descriptions. All such representations must be thoroughly and independently researched and verified before any documents are signed or any funds invested.
38. Obtain in writing Vietnam government guarantees against expropriation or other taking of property by governmental authorities and provide, to the extent possible, in the same document that if it does occur detailed provisions for not only the measure and procedure for determination of compensation, but also the required time, method, currency of payment, etc.
39. Do not sign any documents unless your legal counsel has made certain and assures you that they will meet with the full approval of governmental authorities. Pre-clearance of documents with governmental authorities before they are executed is essential.
40. Make sure that document translations are done by qualified experts and have documents translated into English from Vietnamese translated back into Vietnamese from the English and vice versa to make sure the translations are accurate and in accord in meaning as much as possible.
41. Avoid, if at all possible, letters of intent and/or memorandums of and if you feel compelled to sign one, make sure it provides that it is non-binding and that there is a right to terminate even your moral obligation to proceed if definitive documents have not been executed between the parties by a certain date. Memorandums of Understanding signed with multiple parties for the same project by Vietnamese parties have not been uncommon.
42. In preliminary as well as definitive contractual documents provide for the right to terminate the arrangement or obligation to go forward with the project or financial or other obligations if identifiable events do not occur within defined periods of time.
43. Provide in the documentation that if any agency of government in Vietnam at any level (national, provincial or local) imposes material adverse conditions on your proceeding or continuing with the transaction not provided for in documents previously approved or not acceptable to you, that you have the right to terminate your obligations under the documents executed and to withdraw from Vietnam your investment in dollars and/or in kind (at your option) within defined time period(s) without any delay or any liability.
44. To the extent possible, hedge your currency risks in Vietnam.
45. Avoid as far as possible the granting of loans or the disbursement of funds prior to obtaining a satisfactory Investment License, and try to procure a secure source of loan payback and currency convertability.
46. If you are going to manufacture principally for export, locate your project in a self-sufficient export processing zone such as the Tan Thuan Export Processing Zone in Ho Chi Minh City, the Nomura-Haiphong Industrial Zone (not EPZ) in the northern city of Hai Phong…
47. If you are going to manufacture or have manufactured for export from Vietnam any products, make absolutely sure before you invest any significant sum or contract for the purchase of any goods that you or the exporter are assured in writing by the proper governmental agency(ies) that you or they will have an adequate and guaranteed export quota for the products manufactured and that this quota will be permitted for a defined period of time.
48. If you are going to make a substantial investment in a manufacturing facility producing entirely or primarily for the domestic market make sure before you proceed how many other such projects the Vietnamese government may have licensed or may be going to license. You may find that if the numbers are too great, your project will prove to be uneconomic. The Vietnamese government’s policies on import duties and/or import quotas for similar products may have similar adverse effects.
49. Make sure Vietnamese employees are treated with respect, paid fairly and on time and that Vietnamese labor laws and regulations are strictly complied with. The Vietnamese are extraordinarily sensitive on matters of this type.
50. Thoroughly investigate and endeavor to fix (as much as possible) your local labor and consumables costs during construction and operations for as long a forward period as possible to avoid both disruptions and holdups.
51. Make sure that whatever permits have been granted to proceed with any aspect of the project have been obtained from the proper authority and have not been tainted by any irregularity.
52. Make sure before you begin the construction of any project that there are or will be fully adequate and assured sources of power, water, sewage and any other utilities that may be required in order to enable the project to effectively function from day one and make absolutely certain that the ground and sub-ground conditions will adequately support your building. A building which sinks slowly into the ground will be nothing to be proud of!
53. Heavy rains and floods are not uncommon in Vietnam. Make sure your office and/or plant and/or housing facilities are located in areas which will always be above water or otherwise well protected from flooding.
54. Make certain that if any permits are required from your home country to engage in or transfer funds for or to a project in Vietnam, you should obtain such permits in a timely fashion so that you will be able to comply with the requirements of the Vietnamese government.
55. If you are going to manufacture for export, be sure you are aware of and comply with any Vietnamese local manufacture content and quality requirements so as to ensure your ability to obtain required export permits.
56. Whether you are manufacturing for the domestic market or for foreign markets, if your product requires foreign components make absolutely sure you have the proper and iron-clad permits to import the components you require for the period required.
57. Beware of provisions of the Vietnam Foreign Investment Law which in certain instances give veto rights by requiring unanimous consent to the approval of certain matters (i.e., loans to the joint venture; approval of annual financial accounts; amendments to and modification of joint venture Charters; appointment and dismissal of the General Director, First Deputy General Director and Chief Accountant) to the minority partner in a joint venture, and do everything you can to neutralize or minimize the possible adverse effects of such veto rights.
58. Be conscious of the possible adverse effects in a particular area of changing weather and ground conditions on the feasibility and/or viability of your project.
59. Even before you begin to seek to do or do business in Vietnam, make sure your intellectual property rights (trademarks, tradenames, patents, etc.) are protected to the maximum extent possible. The technology transfer requirements of Vietnamese law and regulations are unjustifiably severe. You must seek expert guidance before you agree to anything in this area. You may regret trying to be a nice guy.
60. Before entering into a lease or purchase of any real property, make sure the property has been constructed and/or will be constructed in full accordance with Vietnamese law.
61. If your transaction is being done in an area significantly affected by the public interest (i.e. utilities, ports and harbors, highways, mining, etc.) make sure it is done on commercially competitive terms. Too good a deal may be the undoing of the deal.
62. In a Build, Operate and Transfer (BOT) project, the ability to charge users a sufficient amount to amortize the project(s) costs and secure a reasonable profit and the ability of the users to pay such charges are crucial elements. Everything possible must be done to provide and guard against national and local authorities adversely affecting or changing unilaterally what you are permitted to charge under the BOT Agreement. If adverse changes in the user charges are forced upon you by any government agency, the government must be required to indemnify you against any losses you suffer within specified time limits.
63. If your project will be a significant producer of jobs for Vietnamese workers and/or result in significant revenues and/or other benefits for the Vietnamese economy, do not underestimate the special and favorable tax arrangements you may be able to make with the Vietnamese government.
64. Avoid at all costs the overpricing or overvaluation of any new or used capital or consumer goods you are importing into Vietnam. Government officials are very attentive to this problem and such conduct can be very damaging to your interests and can cause you insuperable problems particularly if you are in a joint venture.
65. The importation of used capital equipment for a project is not looked upon favorably by the Vietnamese government and efforts to do so must proceed with extreme caution and only with the clear permission of Vietnamese authorities.
66. Be aware of the fact that the value and quality of equipment and machinery imported for the implementation of investment projects must be reviewed by a valuation company (domestic or foreign) acceptable to the Vietnamese government prior to being imported or installed.
67. The Vietnamese banking system is in its infancy and even the Vietnamese are very reluctant to deposit funds in local banks. The lending capacity of local banks is, therefor, very limited and Vietnamese borrowers clearly have preference in borrowing from such banks.
68. Foreign invested projects in Vietnam for the most part have to be financed from foreign sources since there is very little financing, if any, available for such projects from Vietnamese institutions. Virtually all foreign invested projects of any significant size going forward in Vietnam are financed by the credit worthiness and/or guarantees of the foreign partner and/or foreign financial institutions or governments and not by the credit worthiness of the project itself.
69. Do not commence the construction of any project unless you are absolutely certain you have the requisite land lease for the term required and covering the proper geographical area, and that all architectural, as well as zoning, elements of the project outside and inside have been unequivocally approved by the local authorities. Beware of the possibility that your project’s height or design may offend the tastes of Vietnamese government leaders, leading to very costly interruptions in the building process and forced redesigns of the project (including reducing the number of floors), even after it has been completed!
70. The Vietnamese government is becoming increasingly astute at enforcing its tax laws against foreigners and foreign controlled enterprises. Once you have been accused of violating those or any other Vietnamese laws, you will have a real and possibly catastrophic problem on your hands.
71. Accounting, auditing and other statistical work of foreign-invested enterprises must be carried out in accordance with Vietnamese laws relating to accounting and statistics. If valid reasons exist, the foreign-invested enterprise may seek the approval of the Ministry of Finance to adopt a generally accepted foreign accounting system.
72. Be extremely careful not to exceed the authority you are granted by the Vietnamese government to do business there. The terms of permits to do business granted by the MPI, et al., are construed very strictly against the foreigner or foreign enterprise. Do not take unfair advantage of the good will of the Vietnamese.
73. Do not underestimate the cost of living and doing business in Vietnam. For instance, decent housing and office space for foreigners is extraordinarily expensive, particularly in the Hanoi and Ho Chi Minh City areas. Obtaining a license to do business can cost anywhere from US$25,000 to US$250,000 or more (for lawyers’ and accountants’ fees, feasibility studies, etc.), depending on the size and complexity of the investment and whether or not it is a 100% foreign owned enterprise, a joint venture enterprise or a build, operate and transfer project, etc.
74. Vietnam has entered into few tax and investment protection treaties or agreements with other countries. In doing your financial analysis of a project, the financial impact of the presence or absence of such treaties or agreements with your country (if such is the case) (particularly the absence of a foreign tax credit) must be carefully taken into account.
75. Do not assume that a Vietnam government agency or a state owned enterprise you are dealing with has the authority to enter into a transaction with you. Make sure that you are dealing with the properly authorized agency or enterprise and/or one that will without question be authorized to deal with you and enter into the transaction contemplated. If you are in the wrong hands you can not only lose a lot of money and time, but you can also suffer great embarrassment. There is considerable competition among government agencies and/or enterprises claiming (sometimes rightfully and at other times erroneously) authority to enter into the same or similar transactions.
76. Be conscious of the special problems and extra costs to a company’s operations that can be caused by the inspections of company accounts that are permitted under Vietnamese law by local tax authorities, the General Department of Taxes and the MPI and possible reassessments or revaluations. There is no statute of limitations in respect of tax audits and therefore any tax years of a joint venture can be reassessed at any time.
77. Be aware of the fact that the MPI has the power to review the amounts agreed as contributed by parties to a wholly owned venture or a joint venture and to require these to be reassessed. The MPI also has the right to designate an independent organization to do the reassessment and where errors are discovered to require the cost of the reassessment to be borne by the enterprise or the parties.
78. Virtually all foreign invested projects in Vietnam are required to have a fixed term of existence and there is no assurance that at the end of such term the project will be permitted to continue or renewed or the interest of the foreign partner will not be forfeited to the local joint venturer or the Vietnamese government. You obviously must seek the longest term possible for your project but you also must adequately provide, if possible, that you will be compensated for the value of your investment as it exists at the time divestment is required or termination occurs and a procedure and formula for such determination must be well defined and not left to chance. The same is true for ensuring that a timely procedure for payment of whatever value is determined for your interest is firmly set forth as well as provisions for prompt foreign currency availability and remittance.
79. Make sure you have adequate foreign health, hospital and disability insurance coverage (which will cover you while you are in Vietnam) before you go to Vietnam. Also make sure your medical insurance provides for the costs of evacuating you by air to medical facilities outside of Vietnam. Medical facilities and the quality of medical care in Vietnam still leave much to be desired.
80. Most foreigners [excepted are Board of Directors members, directors (or general directors) and assistant directors (or assistant general directors)] employed in enterprises with foreign capital in Vietnam are not permitted to work at a joint venture or wholly foreign-owned company for more than three years (with no provision in the government decree governing these matters for extensions) and foreign companies are required to train local replacements for foreign staff. The impact of these requirements on a project (practicality, costs, etc.) must be considered from the outset of project planning and implementation.
81. The deductibility of operating losses by a foreign-invested enterprise must be carefully attended to.
82. Be wary of interviews with members of the foreign press. Foreign press representatives in Vietnam are subject to very tight restrictions on what they can and cannot do in Vietnam. Be certain that the foreign press representative has been fully authorized by the Vietnamese government to interview you, and be very careful not to offend the government in the interview.
83. Whether you are producing goods for the Vietnam domestic market or for export, you are required to register under and comply with the quality control regulations administered by the Ministry of Science, Technology and Environment, the Ministry of Health, the Ministry of Agriculture and Rural Development, the Ministry of Fisheries – as the case may be – and no goods may be sold until such registration is effective, and the rules and regulations governing same are complied with.
84. Do not assume that all of the above suggestions are all that you need to know to do business in Vietnam and properly protect your interests.
(AmCham: https://www.amchamhanoi.com/business-information/dos-and-donts-for-business-practices-in-vietnam/)