VIETNAM—FOREIGN DIRECT INVESTMENT AND UNINTENDED EFFECTS AND OPPORTUNITIES OF CPTPP/EVFTA

According to the Ministry of Planning and Investment (MPI), in the first 5 months of 2019, foreign direct investment (FDI) projects were US $7.3 billion, up 7.8% as compared to the same period in 2018. In addition, FDI contribution to the state budget rose from US $1.8 billion during 1994-2000 to US $14.2 billion during 2001-10, and to US $23.7 billion during 2011-15. In 2017 alone, FDI contributed US $8 billion to the state budget, accounting for 17% of the total state budget.[1] Phan Huu Thang, Vice Chairman of Vietnam’s Association of Foreign-Invested Enterprises, told Vietnam Investment Review that hi-tech processing and manufacturing, smart agriculture, healthcare, education and training, and renewable energy will be the hottest sectors for FDI in the coming months and years.[2] All these numbers and projections sound fantastic, but there are always impediments to a flourishing FDI program, as well as untapped (or under-utilized) opportunities. More importantly, how can the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) and European Union—Vietnam Free Trade (EVFTA) agreements foster and support FDI?

Two important draft laws affecting FDI originally slated for passage in July 2019 have, unfortunately, been postponed for passage until May 2020 per Resolution 78 (78/2019/QH14) in the Vietnam National Assembly: the Law on Investment in the Public Private Partnership Form [Law on PPP] and the Law Amending the Law on Investment and the Law on Enterprises.[3] There will be more to come on the effect of those laws after passage.

Unintended Effects of CPTPP and EVFTA on FDI

In the first five months of 2019, Vietnam’s FDI attraction reached a total value of US $16.7 billion, up 69 percent over the same period last year.[4] Currently, there are 131 countries and territories with valid investment projects in Vietnam, of which the Republic of Korea (RoK), Japan and Singapore claim the top three places (Japan and Singapore are CPTPP countries).[5] Since the beginning of 2019, however, a new top contender is emerging—China. In the past, China has been the seventh largest investor in Vietnam (with US $15 billion total); however, in the first half of 2019, their FDI alone was US $2 billion.[6] This is not a great surprise as the US—China “trade war” continues, but it does highlight that China is intending to exploit Vietnam’s entrance into the CPTPP and EVFTA (Agreements that China does not currently benefit from). This year, the Vietnamese government licensed the US $280 million ACTR tire-manufacturing project in the southern province of Tay Ninh, and a US $214.4 million project by the Advance Vietnam Tire Co., Ltd in the Mekong Delta province of Tien Giang.

ACTR manufactures steel-radial tires for trucks and busses, and is a joint venture between China’s Sailun Vietnam Co., Ltd, (with 65% equity) and the US’s Cooper Tire and Rubber Co. (35% equity). Because of the more stringent Certificate of Origin (COO) requirements under the CPTPP, China could no longer import tire components from CPTPP countries and process them domestically to obtain CPTPP member-country benefits (or vice versa—export components for assembly). They would need to have a physical processing plant located in Vietnam to claim “Made in Vietnam” COO. With that member-country COO, China now enjoys zero-tariffs on those products exported to member nations. That is a significant counter to the US—China trade tariffs, and a direct result of CPTPP. Advance Vietnam Tire Co. (owned by Guizhou Advance Type Investment co., Ltd, of China) is an almost identical example to ACTR; other than Advance is not a joint venture. China could have invested in other CPTPP countries, but Vietnam is the most attractive and cost-effective venue for FDI compared to others.

The EVFTA contains similar provisions as the CPTPP regarding tariffs and duties. With the EVFTA now in force, China has poised itself to take advantage of this new regulatory environment for the European markets. Using the examples from above, China will now be able to compete (in effect with domestic-preference) directly with Europe’s largest physically domestic producer of tires, Michelin.

Before CPTPP, EVFTA, and the US—China trade tensions, Chinese investors were mainly small businesses with out-dated technology, but now many large corporations are funding large-scale projects. Five of the seven biggest foreign-invested projects in the last five months came from Chinese backers, including not only the ones already discussed, but also a US $260 million electronic equipment and multimedia audio products manufacturing project invested by Hong Kong-based Goertek Co., Ltd.[7] Chinese investors are also increasing merger and acquisition (M&A) activities. Hong Kong topped foreign investors in Vietnam with the US $3.8 billion purchase of Vietnam Beverage Co. Ltd, in Saigon Beer-Alcohol-Beverage Corp (SABECO).

It appears clear from the investment activity in Vietnam since the onset of CPTPP that it has had a substantial positive impact on FDI. With the advent of EVFTA coming in force (and providing similar—if not more—beneficial trade platforms), Vietnam will have a multitude of investors rushing to reap the benefits of those trade agreements. For Vietnam be able to absorb this inevitable expansion of its FDI landscape the government needs to adapt holistically (and quickly) to the new global trade environment they have embarked on to realize its full potential.

EVFTA and CPTPP Vocational Training Market Opportunity

As Phan Huu Thang mentioned, education and training and renewable energy will be some of the hottest sectors in the coming months and years for FDI. An often-overlooked aspect of FDI is Vocational Training Schools. Vocational training will be critical to the long-term success of Vietnam’s infrastructure platforms, especially when operating and maintaining an enhanced energy and power sector. With highly advanced and technologically complex energy platforms (especially renewables) comes a requirement for competently trained personnel to sustain them. Vietnam has a large workforce pool; however, technical training for these opportunities is currently limited.

The EVFTA and CPTPP both have provisions easing the access of engineering and technology support to assist in achieving the required knowledge and training skillsets.[8] Vietnam recognized this also and updated their regulatory requirements regarding vocational schools through Decree 15 (15/2019/ND-CP), which specifies the order and procedures for opening foreign-invested vocational training schools.[9] The FDI project would need to be in line with the national planning of vocational training in Vietnam, but the threshold capital requirements have been lowered to VND 5 billion (US $216,000) to open a vocational training centre, VND 50 billion (US $2.2 million) for a vocational secondary school, and VND 100 billion (US $4.4 million) for a vocational college.[10] In addition, if a project is aligned with an industry of national priority or significance (enter renewable-energy), the Ministry of Labour will be the sole authority on issuing licenses[11]—a departure from the traditional methodology in an effort to streamline the process. This is good news for many renewable energy projects. Not only will a foreign business have more opportunities for development under CPTPP and EVFTA, but they can also add a minimal supplement to that investment and create the necessary workforce to support it.

An example from USA clearly demonstrates the opportunity in vocational training schools. In 2011, Boeing, Inc. opened a final assembly facility for the 787 Dreamliner in Charleston, South Carolina. Along with that came a demand for technically trained personnel to operate the complex facility and to have personnel trained in the intricate technology involved in assembling the aircrafts. Boeing invested US $80 million to have an aeronautical vocational training facility built near Boeing’s assembly plant (completed June 2019).[12] This is a win-win for Boeing. They provided the initial funding to build the vocational facility; in return, they have professionally trained personnel, and the government takes over costs of maintaining the training facility. Boeing also gets guarantees from the government to repay Boeing’s initial investment through tax incentives and bond issuance. This is a textbook case of vocational FDI supplementing an already significant investment.

As many foreign investors establish their presence even more in Vietnam’s infrastructure landscape, this is another opportunity for FDI to affect Vietnam’s (and the investor’s) bottom-line. The EVFTA and CPTPP are enablers as they both allow services to flow less restrictively between the parties. Phan Huu Thang noted that for Vietnam to realize its fourth-industrial-revolution plan (4IR), local enterprises [must] be encouraged to cooperate with foreign-invested enterprises to learn experience, transfer technology, and receive support in training.[13] Vocational training centers will help fill that need.

Summary

Vietnam’s FDI has been steadily increasing for decades. FDI has helped transform Vietnam from a poor nation to the verge of a massive middle-class population. CPTPP and EVFTA are two vehicles that will propel Vietnam across that line and perhaps even further. The tangible benefits of CPTPP are already proving themselves as evidenced by the hard-data collected. The unintended effects on FDI from non-member countries, however, have a distinct possibility of compounding those benefits exponentially as others see the potential of CPTPP and EVFTA. Traditionally under-utilized sectors for FDI in education and training are also poised to take advantage of these trade agreements. While not the most high profile, E&T are necessary support vehicles to sustain the larger sectors. Vietnam has been slow, thus far, in aggressively changing their regulatory environment to adapt; however, they need to act expeditiously to fully reform their regulatory environment in order to meet this inevitable influx of FDI.

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If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyers in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Thank you very much!

VIETNAM FOREIGN DIRECT INVESTMENT (FDI) – LATEST UPDATE AND OUTLOOK ON EUROPEAN UNION – VIETNAM FREE TRADE AGREEMENT (EVFTA)

Vietnam has worked on attracting FDI with a reduced Corporate Income Tax for prioritized sectors, with a lowered standard rate – from 25 to 10-20 percent – and by waiving the land rental fees for Foreign Invested Enterprises (FIEs).  If the FDI are promoted, it is mainly due to the technological transfer they include.  Despite the increasing number of foreign invested enterprises in Vietnam, the spillover effects are still expected because of the lack of three conditions: dense backward linkages, geographical proximity and FDI absorptive capacity.

Our first concern tackles the lack of backward linkages created by Vietnamese firms.  More than half of the FIEs import inputs from home or from a third country, depending on several factors: the suppliers form, the sector and the country of origin.

FIEs are mainly served by private and import suppliers, even though the percentage of FIEs by suppliers’ type varies within each sector.  Finance and services are the two sectors with the most backward linkages since they rely on human capital.  In manufacturing and mining sectors, the FIEs import more than half of the inputs from another country.

Besides, the FIEs are diversifying their sources, showing a change of sourcing strategy regardless of the investment incentives they receive.  The suppliers’ types are more diverse than it used to be: in 2-year time, 45 to 68% of the FIEs served by domestic private suppliers, 10 to 20% served by household suppliers… the in-house sourcing is the only supplier form which has decreased.

The many incentives are meant to promote FDI in high-tech sector, underprivileged regions and other priority sectors, but we can question the reality of the technological transfer. Indeed the incentives target regions and sectors that are not ready to receive such advanced technologies and therefore FIEs in more developed regions do not rely on incentives.

Across provinces, the main sectors determine the source of FIEs suppliers considering the complexity of the technology needed for the activity. Vietnamese suppliers are more able to form linkages with FIEs in lower-tech sectors, where the technological gap is not prohibitively large.  Thus, more linkages are established with Taiwanese companies which concentrate on textiles, light manufacturing and light electronics, than with Japanese or Korean companies specialized in complex electronics.  FIEs are under no obligation to transfer their technology which prevents Vietnamese firms to join the high-tech supply chain and to establish forward linkages.

The geographical proximity between the FIEs centers and the domestic private firms must be greatly considered as the transfer of technology mostly occurs in face-to-face technical consultations.  Yet, it is difficult to draw a distinction between the proximity impact and the domestic firm’s strategy.  In either case, the proximity has an influence over the choice of strategy and a close proximity ensures a better technological spillover.  The establishment of a private domestic firm in an industrial zone increases the efficiency of exporting but diminished the chance of technological transfer by isolating the FIE from a larger economic pole.

Finally, the FDI absorptive capacity facilitates even more technological transfer.  Indeed, if the gap between the domestic enterprise and the FIE in matter of new technology and of work force training is too large, the potential for transfer is reduced.

In matter of labor quality, State-Owned Enterprises have a higher percentage of high-quality labor when domestic firms have less educated labor force.  The quality of the work force is crucial to adopt FIE’s technologies and management techniques.  Thus, domestic suppliers of FIEs are less likely to assimilate from their foreign clients due to a more limited absorptive capacity.  Improving labor quality is the key missing in promoting FIEs technological transfer.  The linkages and the proximity only allow people to get in touch and enhance a better spillover.

Guidance on the EVFTA

It is a golden time to invest in Vietnam due to the FTA, Vietnam being the only ASEAN country to sign this agreement with the EU (Singapore has signed the FTA in 2014 but this does not affect Vietnam’s competitiveness as Singapore mainly exports machines, chemical products and transport equipment).

Under the provisions of the agreement, over 99% of the tariff lines will be eliminated within 7 years from the effective date of the FTA.  Vietnam’s duties on EU exports will disappear in a ten-year period, EU’s duties in a seven-year period for some products (motorcycles, car parts, half of EU pharmaceutical).  The opening of the market will emphasize commercial relations between EU and Vietnam and benefit to both of them. Vietnam’s commitments to World Trade Organization (WTO) and to additional (sub)sectors such as Interdisciplinary R&D services, nursing services, packaging services etc. offer the EU partners best possible access to Vietnam’s market.

For the distribution sector, an Economic Needs Test is required, as for the WTO, but with exemptions and time delay of five years after the date of entry into force of the Agreement. Thus after 5 years, the requirement of the ENT will be abolished.

Vietnam is the most investment worthy place in ASEAN and will ensure this position partially thanks to EU-VN FTA. Its stable development of the economy and controlled inflation, its adapted legislation foster an environment proper to investment.

Most important issues

  • Consider what suppliers’ form is the most suitable to be served by, regarding the technicity of the activity.
  • Choose the relevant strategy to adopt between perceiving incentives but letting go of linkages, and establishing backward linkages with the domestic firms’ even if it means waiving incentives.
  • Decide the timing to invest: Vietnam is the new land of investment this is why investors should position themselves as early as possible to timely grab the opportunities that FTAs create when they come into effect.
  • Pay attention to the newly adopted legislation: the Government tends to improve the business climate by reforming the legislation, especially when new trade pacts are coming into effect (e.g. Investment Law, Enterprise Law, decree on Public-Private Partnership).

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Please do not hesitate to contact Mr. Oliver Massmann under omassmann@duanemorris.com if you have any question on the above, Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

 

Rechtsanwalt in Vietnam Oliver Massmann Auslandsdirektinvestitionen (FDI)

Vietnam unterzieht sich fundamentalen Veränderungen um ein attraktives und wettbewerbsfähiges Fundament in Vorbereitung auf die kommende ASEAN Wirtschaftgemeinschaft (AEC) zu bilden, welches die EU-Vietnam FTA und die Transpazifische Partnerschaftsvereinbarung (TPP) beinhaltet.
Seit Juli 2015 traten eine Vielzahl von neuen Gesetzen in Kraft die Auslandsinvestitionen, Unternehmen, Grundbesitz und Eigentumsbeschränkungen von Ausländern regulieren.
Beispielsweise das neue Gesetz zu Investitionen und das neue Gesetz zu Unternehmen:
i) definiert auslandsfinanzierte Unternehmen
ii) Erleichtert M&A Tätigkeiten
iii) Reduziert die Zahl der Verbote und Bedingungen im Unternehmenssektor
iv) Reduziert gesetzliche Lizensierungszeiten für Unternehmen
v) Gestaltet die Unternehmensführung flexibler (wie z.B. mehrfache Stellvertretung und Verringerung der Wahlvoraussetzungen) und
vi) erzeugt günstigere Konditionen für Aktionärsklagen/Anlegerklagen

Darüber hinaus treten neue Gesetz und Regulierungen in Kraft die das Eigentum von Ausländern an Grundbesitz betreffen.
Ausländer können nun Appartements besitzen und erstmals Häuser kaufen. Sie dürfen nun auch Untervermieten und Grundbesitz erben.
Die durch das Inkrafttreten einiger internationaler Handelsabkommen, im besonderen EVFTA, eintretenden positiven Veränderungen werden von den EuroCham Mitgliedern begrüßt, da sie nicht nur das Unternehmen fördern, sondern auch zu Vietnams Wachstum beitragen.

Vietnam als attraktives FDI Ziel
Zusätzlich zu der Vielzahl an rechtlichen Änderungen besitzt Vietnam fundamentale Prinzipien die zu seinem Wachstum beitragen. Beispielsweise ist Vietnam mit 25% der 90 Millionen Einwohners zwischen 10 und 24 Jahren im Goldenen Zeitalter der demographischen Entwicklung. Das Pro Kopf BIP hat sich drastisch erhöht, da Vietnam die am schnellsten wachsende Mittelstandsklasse in Südostasien hat (12,9 % Wachstum pro Jahr zwischen 2012 und 2020). Aufgrund der hohen Lesefähigkeit der Bevölkerung und des Bildungsniveuas mit vergleichsweise niedrigen Löhnen, Konnexität und der zentralen Lage innerhalb des ASEAN wählen mehr und mehr Investoren Vietnam als ihren Mittelpunkt um die Mekong Region und die Region drum herum zu unterhalten.
Vietnams attraktives Profil wird durch die generelle Willkommenshaltung gegenüber Auslandsdirektinvestitionen (FDI) in den Produktionstätigkeiten reflektiert.
Die Verpflichtung Vietnams zur sukzessiven Öffnung der meisten Dienstleistungssektoren nach dem WTO Plan hat in 2007 begonnen und wurde in 2015 abgeschlossen.
Nationales Recht hat zudem den Zugang zum Markt auf andere Sektoren über die WTO Verpflichtungen hinaus geöffnet.
Beispielsweise war die Teilhaberschaft an öffentlichen Unternehmen durch Ausländer früher begrenzt auf 49 % und ist nun generell zu 100 % für ausländischen Anteilbesitz möglich. Vietnam gewährt auch
Zuschüsse für Investitionen inklusive Steuererleichterungen in Bereichen wie z.B. High Tech, Umwelttechnologie und Landwirtschaft, in denen europäische Unternehmen weltweit führen sind.
In 2014 hat Vietnam darüber hinaus 21.92 Milliarden Dollar als FDI verzeichnet mit insgesamt 1843 Investitionslizenzen für auslandsfinanzierte Projekte mit einem registrierten Kapital von 16.5 Milliarden Dollar, was einen Anstieg um 14 % im Vergleich zum Vorjahr darstellt.
Unter den Auslandsinvestoren stellt die EU eine zunehmend wichtige Quelle als FDI für Vietnam dar. „Nach Angaben der Auslandsinvestitionsagentur des vietnamesischen Ministeriums für Planung und Investment haben Investoren aus 23 der 28 Mitgliedstaaten der EU insgesamt Investitionen von 19.1 Milliarden Dollar in 1566 Projekte über 25 Jahre getätigt (Stand 15.12.2014).
Die EU steht aufgrund der starken Aktivität von insgesamt 587.1 Milliarden Dollar in FDIs in 2014 auf Platz 5 der FDI Partner von Vietnam.
Zusätzlich zu den FDIs wird die starke Handelsbeziehung zwischen der EU und Vietnam auch durch Programme wie z.B. MUTRAP, welches über 35.12 Milliarden Euro beinhaltet, deutlich.
MUTRAP half Vietnam in der Verhandlung über den WTO Beitritt und unterstützt Vietnam auch weiterhin bei der Umsetzung der Handelsverpflichtungen.
Bezüglich des Handels wird erwartet, dass sowohl die europäischen als auch vietnamesischen Unternehmen von EVFTA profitieren. Die FTA will sukzessiv die Zölle für über 99 % der Waren und Dienstleistungen abschaffen und auch weitere bilaterale Handelsmechanismen unterstützen.
Am 4.08.2015 haben die EU und Vietnam ein Freihandelsabkommen getroffen, welches mehr FDI in das Land locken soll.

Vietnams Top Handelspartner in 2013
Letzendlich wird das starke Engagement der EU in Bezug auf die Unterstützung Vietnams zur Modernisierung und Integration in die Weltwirtschaft durch die Hilfsprogramme wiedergespiegelt/ deutlich. Die EU hat im Einklang mit dem 2020 sozialökonischem Plan Vietnams ihre Hilfe um 30 % auf 400 Millionen Euro im Rahmen des mehrjährigen Richtprogrammes für die Zeit zwischen 2014- 2020 mit Fokusierung auf die Entwicklung von sauberer Energie in Vietnam erhöht.

Weitere Verbesserungen sind nötig.
Vietnams Entwicklung und Attraktivität bei ausländischen Investoren kann nicht geleugnet werden, da Vietnam fortwährend sein wirtschaftspolitisches Umfeld verbessert. Jedoch wurden, im Zeitpunkt des Verfassens des Artikels, Richtlinien für viele neue Gesetze noch nicht veröffentlicht, und Investoren nehmen Verzögerungen des Bewerbungsprozesses wahr. Wir erwarten eine Verbesserung der Bearbeitungszeiten sobald die Richtlinien in Kraft treten und die Beamten/Amtsträger sich an die Veränderungen gewöhnt haben.
Ein anderes Thema, welches durch unsere Mitglieder hervorgehoben wurde, ist, dass viele ausländische Invetsoren immer noch mit der vietnamesischen Bürokratie zu kämpfen haben. Steuererklärungen einreichen, Zollbefreiungen, Unternehmensregistrierungen und Lizensierungen, sowie weitere administrative Prozeduren werden oft verzögert, das Ergebnis ist unvorhersehbar und Unternehmen müssen Resourcen in die Administration stecken, die sie lieber in die Erweiterung ihrer Haupttätigkeit investieren würden.
Trotz der verbleibenden Hürden hat die vietnamesiche Regierung ihr Verständnis über die Probleme der ausländischen Investoren zum Ausdruck gebracht. Aufgrund des ansteigenden Zugangs ausländischer Investoren zum Markt wird erwartet, dass Auslandsdirektinvestitionen weiter fließen. Für die ausländischen Investoren wird das potenzielle Risiko wesentlich von der positiven wirtschaftlichen Entwicklung des Landes und seiner Grundsätze überwogen .
In diesem Lichte möchte die EuroCham in Verbindung mit einigen wichtigen Ratschlägen die Kernprobleme präsentieren, die ihren Mitgliedern aufgrund der Tätigkeiten in Vietnam begegnen.
EuroCham hofft auf einen konstruktiven Dialog und ansteigende Kooperation mit den respektiven Behörden bezüglich der angesprochenen Schwierigkeiten in diesem Artikel, um das wirtschaftspolitische Umfeld für alle Unternehmen in Vietnam weiter zu verbessern und um zur schnellen Modernisierung des Landes beizutragen.

Bei Fragen oder weiteren Informationen zu dem oben gesagten zögern Sie bitte nicht Oliver Massmann unter omassmann@duanemorris.com zu kontaktieren. Oliver Massmann ist der Generaldirektor von Duane Morris Vietnam, LL.C.
VIELEN DANK!

Vietnam Foreign Direct Investment

By Oliver Massmann and Manfred Otto – Duane Morris Vietnam LLC

Foreign Direct Investment

A Brief Overview
Vietnam is undergoing fundamental changes to form the basis for its attractiveness and competitiveness in preparation for the ASEAN Economic Community (AEC), the upcoming trade agreements including the EU-Vietnam FTA and the Transpacific Partnership Agreement (TPP).
Since July 2015, a number of new laws and regulations governing foreign investment, enterprises, real estate and foreign ownership limits have come into effect. For example, the new Law on Investment and the new Law on Enterprises:
(i) clarify definitions of foreign-invested enterprises;
(ii) facilitate M&A activities;
(iii) reduce the number of prohibited and conditional business sectors;
(iv) reduce statutory business licensing times;
(v) provide more flexibility with regard to corporate governance (such as multiple legal representatives and lower voting thresholds); and
(vi) create more favourable conditions for shareholder lawsuits.
In addition, new laws and regulations affecting foreign ownership of real estate have come into effect. Foreigners can now own apartments and for the first time buy houses. They are now also permitted to sublease and inherit real estate.
With the coming into effect of several international trade agreements and more particularly, the EVFTA, EuroCham members are looking forward to the positive changes that will be implemented and that will further business incentives as well as contribute to Vietnam’s growth.
Vietnam as an attractive FDI destination
In addition to the numerous legal changes, Vietnam has fundamental elements that participate to its continued growth. For instance, Vietnam is in a demographic golden age, with 25% of its 90 million people population between 10 and 24 years old. GDP per capital is increasing drastically as Vietnam has the fastest-growing middle class in South East Asia – (12.9% per annum over the period 2012-2020). Along with a high literacy rate and education levels, comparatively low wages, connectivity and central location within ASEAN, more and more foreign investors choose Vietnam as their hub to service the Mekong region and beyond.
Vietnam’s attractive profile is reflected in its generally welcoming of foreign direct investment (FDI) in manufacturing activities. The gradual opening of most service sectors under Vietnam’s WTO commitments schedule that began in 2007 has been completed in 2015. Domestic law has expanded market access in some sectors beyond those of Vietnam’s WTO commitments. For example, foreign shareholding in public companies that was previously capped at 49% is now generally open for to up 100% foreign ownership. Vietnam also grants investment incentives including tax breaks in areas, such as high-tech, environmental technology, and agriculture, where European businesses are global leaders.
Furthermore, in 2014, Vietnam recorded $21.92 billion in FDI with a total of 1843 investment licenses for foreign invested projects with a registered capital of $16.5 billion, representing a 14% increase from the previous year. Among the foreign investors, the EU is an increasingly important source of FDI for Vietnam as ‘according to the Foreign Investment Agency of the Vietnamese Ministry of Planning and investment, investors from 23 out of 28 Member States of the EU injected a total committed FDI worth US$19.1 billion into 1566 projects over the course of the past 25 years (by 15 December 2014)’. With this strong activity, in 2014, the EU positioned itself as fifth in the top FDI partners of Vietnam with a combined committed FDI of US$587.1 million.

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Source: ‘Vietnam’s logistics market: Exploring the opportunities, Hong Kong Trade Development Council (HKTDC)

In addition to FDI, the EU-Vietnam’s strong trade relationship can be seen through programmes like the Multilateral Trade Assistance Project (MUTRAP) which accounts for over €35.12 billion. MUTRAP has been instrumental in supporting Vietnam’s negotiating efforts during the WTO accession process and now continues to assist Vietnam in the implementation of trade commitments. In terms of trade, both the EU and Vietnamese businesses are expected to benefit under the EVFTA. The FTA will gradually eliminate tariffs for over 99% of goods and services besides other mechanisms to support bilateral trade. On 4 August 2015, the EU and Vietnam reached an agreement in principle for the free trade deal, an agreement that will also attract further FDI into the country.
Vietnam’s top trading partners 2013
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Finally, the EU’s strong commitment to support Vietnam in its modernisation and integration in the world economy is mirrored by the aid programmes. In line with Vietnam’s 2020 socio-economic plan, the EU has increased its aid by 30 % reaching 400 million euros via its multi-annual indicative programme for the period of 2014-2020 focusing on the development of clean energy in Vietnam.

Further improvements necessary
It is clear that Vietnam’s development and its attractiveness to foreign investors are undeniable as Vietnam is constantly improving its business environment.
However, as of this writing, guiding regulations for many new laws have still not been published, and investors are experiencing delays in the processing of applications. We expect processing times to improve once the new implementing regulations come into effect and officials get accustomed to the changes.
Another issue that has been highlighted by our members is that many foreign investors still face significant challenges when dealing with Vietnam’s bureaucracy. Tax filing, customs clearance, business registration and licensing, and other administrative procedures are often delayed, outcomes can be unpredictable, and businesses find themselves spending resources on administration that they would prefer to invest in expanding their core activities.
Despite remaining hurdles, the national government of Vietnam has expressed an understanding of the issues surrounding foreign investment. Providing foreign investors increased access to its market, the stream of FDI is expected to continue. For many foreign investors the positive economic development of the country and its fundamentals substantially outweigh potential risks.
In this light, EuroCham wishes to present the key issues that our members face in their activity in Vietnam along with some key recommendations. EuroCham hopes to engage in a constructive dialogue and increasing cooperation with the relevant authorities on all the issues presented in this edition in order to improve the business environment for all enterprises in Vietnam and contribute to the country’s fast modernisation.

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1‘Vietnam; from golden age to golden oldies’, UK FOC, 07/01/15. Available at
2‘Report revises 2014 FDI figures’ Viet Nam News, 18/03/15. Available at
3‘Investment -EU-Vietnam economic and trade relations’, Delegation to the European Union to Vietnam, 2015. Available at
4‘Vietnam’s logistics market: Exploring the opportunities, Hong Kong Trade Development Council (HKTDC), 20/01/15. Available at
5‘Trade – EU-Vietnam economic and trade relations’, Delegation to the European Union to Vietnam, 2015. Available at
6‘European Union, Trade in goods with Vietnam’, European Commission DG Trade, 10/04/15, p.9. Available at
7‘Development Cooperation’, Delegation to the European Union to Vietnam, 2015. Available at

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