Vietnam's revised Law on Investment (Law No. 61/2020/QH14, the Law) enters into force from January 1, 2021. The National Assembly adopted the Law on June 17, 2020. It will replace Law No. 67/2014/QH13, which has been in force since 2014. Notable provisions of the Law for foreign investors in Vietnam include the introduction of a "negative list" for foreign investment, increases in ownership thresholds for treatment as a national investor, a "national security" provision, new investment incentives, and additional measures to streamline investment procedures.
The Law will be accompanied by implementing regulations, which are currently being developed by the Ministry of Planning and Investment, providing additional guidance as to conditions for investment in certain sectors, procedures for obtaining project approvals, and other key details.
KEY OUTCOMES IN THE LAW:
1. Negative list.
2. Lowering "foreign investor" threshold from 51% equity to 50%.
3. Restrictions relating to "sham" nominee transactions.
4. National security measures.
5. Investment incentives.
6. Other notable provisions.
OUTLOOK
While the Law appears structurally more permissive of foreign investment, certain administrative hurdles remain in place (e.g., the requirement that investors acquire project-specific Investment Registration Certificates and high-level approvals for certain types of investments). Further, uncertainty remains as to the specific conditions for investment in the "conditional" sectors, as well as the potential use of the blanket national security provision.
Despite these administrative and political considerations, foreign direct investment in Vietnam continues to increase at a consistent pace – reaching US $38.2 billion in 2019, up 7.2% from the year prior – and appears poised to continue. Vietnam's ratification of the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in August 2020 and January 2019, respectively, also support the Government of Vietnam's commitment to provide additional certainty and opportunities for foreign investors.
Two other notable laws of interest to foreign investors will also enter into force from January 1, 2021. The new Law on Public-Private Partnership (PPP) (Law No. 64/2020/QH14) will strengthen and codify provisions relating to PPP projects at the law level (as passed by the National Assembly), which could potentially reduce the uncertainty and ambiguity of the legal framework applicable to a particular infrastructure project. Meanwhile, the amended Enterprise Law (Law No. 59/2020/QH14) streamlines the regulation of the establishment, operation and governance of corporate entities in Vietnam and enhances protections for minority shareholders, among other key provisions. (VD)