Viet Nam - A Guide for Business and Investment - asean-korea centre

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PART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENTing and swaps, etc., narrowing the gap to internationalfinancial markets.11. Foreign Exchange ManagementAll buying, selling, lending and transfer of foreign currencyneed to be made through credit institutions andother financial institutions authorised by the State Bankof Vietnam (“SBV”).Outflow of foreign currency by transfer is authorisedfor certain transactions such as payment for importsand services abroad, refund of loans contracted abroadand payment of interest accrued thereon, transfers ofprofits and dividends, and revenues from transfer oftechnology.As a general rule, all monetary transactions in Vietnammust be undertaken in Vietnamese Dong. Exceptionsare applicable to payments for exports made betweenprincipals and their agents, and payments for goodsand services purchased from institutions authorised toreceive foreign currency payments such as paymentsfor air tickets, shipping and air freight, insurance andinternational communications.The obligation of residents to sell a part of their foreigncurrency revenues from current transactions toa local authorised bank has been abolished in 2003and foreign invested enterprises may, subject to certainconditions, buy foreign currency from the banksto fulfil certain foreign currency obligations from theirtransactions.Foreign invested enterprises may open an offshorebank account only with the prior approval of the SBV.Furthermore, where the foreign party to a BOT, BTO orBT requires an offshore account to successfully implementthe project, such an account may be opened.Foreign investors and foreigner working in Vietnam arepermitted to transfer abroad capital investment profitsand income legally earned in Vietnam and – as mentionedabove – remaining invested capital at the liquidationof an investment project.12. Capital MarketThe Securities Trading Centres were opened in Ho ChiMinh City in 2000 (“HCMC STC”) and in Hanoi in 2005(“HN STC”). HA STC only acts as an OTC market for unlistedshares that meet certain conditions. It is plannedthat the HCMC STC will be upgraded to an official StockExchange in 2007.Until the end of September 2006, 51 companies arelisted in the HCMC STC and there are 15 companieswhose shares are tradable in the HN STC. These securitiescentres create a new channel for long-term capitalmobilisation, which will boost the equitisation of Vietnameseand foreign invested enterprises and thus theeconomic reform process.Currently, foreign investors may acquire up to 49% ofa listed company. and 30% of a non-listed company.Bonds may be freely held. The Government is draftinga new regulation to stipulate the limits of shares heldby foreign investors in listed and non-listed companiesbased on Vietnam’s commitments under bilateral andmultilateral international treaties. Under Vietnam’sWTO commitments, after one year from the date ofaccession to the WTO, the 30% foreign equity limitationfor acquisition of Vietnamese enterprises shall beeliminated (except for the acquisition of shares of jointstock banks and a number of certain sectors).In the territory of Vietnam, the purchase and sale ofsecurities by foreign investors must be implemented inVietnamese Dong.In order to purchase shares in an unlisted company,the foreign investor has to open a special VietnameseDong account at a bank permitted to operate in Vietnam,and register such account with the State Bank ofVietnam. All transactions in relation to the purchaseand sale of shares, receipt of dividends and remittanceof profits must be carried out through such special account.With respect to foreign investors investing in listedcompany, they must obtain a transaction code from asecurities company, and open a specialised Vietnamesedong securities trading account at such securitiescompany in order to service the activities of purchaseand sale of securities at Securities Trading Centres.The country’s securities market environment has beenfurther improved in recent years by the speeding-up ofthe process of equitisation of State-owned enterprisesand foreign invested enterprises. The first regulationon equitisation of foreign invested enterprises on a pi-42 Viet Nam - A Guide for Business and Investment
lot basis was issued in 2003. To date, 12 foreign investedenterprises have been equitised. With the issuanceof the new Law on Enterprises and Law on Investment,that came into force from 1 July 2006, foreign investedenterprises now may be established in the form of ajoint stock company.13. LandIn Vietnam, land is considered to be the property of thepeople, and subject to the exclusive administration ofthe State. The latter, represented by the central andlocal land departments, is responsible for the managementof land use rights and leases to individuals,households and domestic and foreign invested economic,political and social organisations. There is noprivate ownership of land.Subject to certain conditions, domestic land users havethe right to use, transfer, lease, inherit (for individualsonly), or mortgage their land use rights (“LUR”), or usethe LUR as capital contribution to a joint venture.Foreign land users are entitled to lease land from theState in general or from Vietnamese or foreign investedenterprises authorised to sub-lease land in industrialand export-processing zones. For foreign land users,the maximum lease period is generally 50 years,although in special cases this term may be extendedto 70 years. Foreign invested enterprises may only usethe land for the permitted purpose. Where the entireland rent under the lease for the LUR has been paid forthe whole land lease duration, foreign invested enterprisesmay mortgage their LUR with banks licensed tooperate in Viet Nam (including foreign bank branches,joint venture banks and 100% foreign owned banks),sub-lease, transfer LUR, or use the LUR as capital contributionto a joint venture.14. Domestic and Foreign TradeVietnamese enterprises are free to carry out tradingactivities in Viet Nam and are allowed to directly exportand import all goods, except for certain restrictedgoods where a special business licence must be obtainedfrom the relevant State authority.Foreign invested enterprises in Viet Nam may directlydistribute or set up a distribution network to sell theproducts they manufacture in Vietnam, and can exporttheir products directly. However, the establishment ofpure trading businesses not associated with manufacturingactivities with foreign invested capital is still restricted,subject to Vietnamese’s commitments underbilateral and multilateral international agreements towhich Vietnam is a party.Under Vietnam’s WTO commitments, for commissionagents’ services/ wholesale and retailing services,upon accession, Vietnam will allow the establishmentof joint venture companies in which the foreign capitalcontribution shall not exceed 49%. As of 1 January2008, the 49% capital limitation shall be abolished.100% foreign owned companies licence will be permittedfrom 1 January 2009.Upon accession, foreign invested companies engagingin distribution services will be permitted to engage inthe commission agents’, wholesale and retail businessof legally imported and local produced products, exceptfor cement, tyres (excluding tyres of airplanes),papers, tractors, motor vehicles, cars and motorcycles,iron/steel, audiovisual devices, wine and spirits, andfertilizers. From 1 January 2009, commission agent,wholesale and retail business of tractors, motor vehicles,cars and motorcycles are allowed. These limitationswill be removed after 3 years from the accessiondate. The establishment of outlets for retail services(beyond the first one) shall be allowed on the basis ofan Economic Needs Test.15. LabourA large, skilled and inexpensive labour force is one ofthe main attractions for foreign investors in Vietnam.Vietnam’s population was estimated approximately83.1 million in July 2005, and it is expected to grow to90 million in 2010 with an annual growth rate of 1.6%.Over 61.6% of the population are under 25 years ofage. Approximately 15.5% of the population are consideredto be trained or skilled workers (with elementaryqualifications or higher). This situation is improvingas a result of updated training programs in training andeducation centres. There are currently substantial interestand new investments in quality training and education,a priority concern for the Government.The Labour Code issued in July 1994 (as amended in2002) has created a legal framework which sets out theViet Nam - A Guide for Business and Investment 43PART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENT
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Page 26 and 27: The center of Hanoi CapitalPART III
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Page 60 and 61: Labour11 Labour Code dated 23/6/199
Page 62 and 63: Real Estate Business34Law No. 63/20
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Page 66 and 67: APPENDIX IIIstruction of private an
Page 68 and 69: 14 Yen Bai Luc Yen, Mu Cang Chai an
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Page 72 and 73: APPENDIX VIUseful contacts and addr
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Page 76 and 77: Dak Lak DPINo. 17 Le Duan str, Buon
Page 78 and 79: Bac Giang IZs MBNo 48 Ngo Gia Tu st
Page 80 and 81: Vietnam - Singapore IZs MBNo. 8 Huy
Page 82 and 83: Germany, 29 Tran Phu St., HanoiTel:
Page 84 and 85: KPMG in VietnamHanoiHo Chi Minh Cit

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