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COVER STORY

conditions for foreign investment is that made use rights certificate (LURC) concerning land
with respect to Article 26.2, whereby the reg- that affects national defense and security.
istration required thereunder is limited only Another barrier is complications involving
to cases where the acquisition of the equity lengthy licensing procedures. Especially in
interest in the Vietnamese company results in the field of real estate development, substantial
an increase in foreign investor ownership. On delays in the licensing procedures have been
the other hand, we have a concern that some reported recently and caused difficulties for
amendments may have a negative impact on Japanese investors. In the field of public-pri-
foreign investment. One such amendment is vate partnerships, Japanese investors expect
the addition of item (c) to Article 26.2, whereby certain schemes on government guarantees Mr. Nakagawa Motohisa,
the aforementioned registration is required if in order to secure their legitimate rights. Head of the Law and Labor Committee,
the Vietnamese company in which a foreign The absence of such schemes results in hes- Japanese Chamber of Commerce and
investor acquires an equity interest has a land itation about conducting investments. % Industry in Ho Chi Minh City (JCCH)

Vietnam has been popular among Japan- regarding countries and regions where Japanese per cent of respondents in Vietnam are planning
ese businesses because of the size of its firms aim to expand business overseas, among to expand their business in a year or two. There
market and its economic growth potential. those that answered that they currently have are several reasons, but sales increases in local
According to JETRO’s survey on the interna- an overseas base and are planning to further markets (65.9 per cent), sales increases due to
tional operations of Japanese firms in 2020, expand operations, the ratio of firms citing export expansion (48.7 per cent), and high
China was the largest (48.1 per cent) and growth potential (44.1 per cent) are the main
those citing Vietnam was the second largest factors behind future business expansion in
(40.9 per cent). The gap between China and the next one to two years. According to the
Vietnam was 47.6 per cent in 2011 but narrowed survey, 65.8 per cent of respondents think of
to only 7.2 per cent in 2020. According to wage hikes as a management issue, while
another survey conducted by JETRO, the shift 56.4 per cent say difficulties in the local pro-
in production caused by the US-China trade curement of raw materials and components
tensions has had a positive impact. The risk is another issue. The local procurement rate
management capacity of the Vietnamese Gov- in Vietnam has been increasing year after
ernment, fully supported by the Vietnamese year and stands at 37 per cent, but is still not
people, to bring Covid-19 under control has as high as in China (67.6 per cent) or Thailand
been appreciated by the Japanese business (59.9 per cent). Japanese companies also expect
community in Vietnam. According to the “2020 infrastructure to be developed in a more pre-
Mr. Hirai Shinji, JETRO Survey on the Business Conditions of dictable manner and in accordance with sched-
Chief Representative, Japanese External Japanese Companies Operating Overseas”, 46.8
Trade Organization (JETRO), Ho Chi Minh City ules announced to the public. %

We believe that investors are cautiously vious law. On one hand, Vietnam very much an attractive investment destination even in
optimistic. There are industries that are wants to attract foreign investment and capital, these challenging times, it has been and is still
greatly impacted and will take time to recover, but such investments and projects would (by necessary for foreign investors to conduct proper
in particular travel and hospitality. However, way of the licensing process) be closely assessed due diligence on their proposed projects. Clearly,
there are also new opportunities and ongoing to ascertain whether they are subject to any financial and commercial due diligence is required,
initiatives, such as the growth in e-commerce, market access limitations or conditions. Also, but legal due diligence is just as important as the
the increased use of technological products where there are new business models presented regulatory framework for investments in Vietnam
and infrastructure, the need for logistics services by players in the digital economy, these are evolves and becomes more robust. %
and support, Industry 4.0, and supply chain likely to be further scrutinized. The law also
relocations. Products that support working maintains the merger and acquisition (M&A)
from home, such as electronic equipment and approval requirements introduced in the previous
furniture or home-related supplies, have also law, but there is a bit more clarity that, in general,
seen growth in exports. These opportunities such approval is only needed where there is an
are sometimes created by the pandemic but at increase in foreign ownership and not a change
other times not related to it at all. Investments in foreign ownership.Vietnam also has a relatively
in the energy sector are vibrant and we expect to new merger control regime in place, which now
see more wind power projects in particular. Real captures more transactions, both onshore and
estate appears to be a mixed bag. While retail and offshore, so long as there is an impact on the
commercial are facing headwinds, it appears that Vietnamese market, it involves an acquisition
investments and opportunities remain active in that renders control to the acquirer, and the deal
the residential sector. Of course, the correct blend meets certain thresholds. Parties in M&A trans-
of location, quality, product offering, and price is actions should conduct an assessment as to
important in order to attract more discerning whether their deal triggers merger filing in its Mr. Seck Yee Chung,
and careful buyers.The new Law on Investment early stages, as this is a process that can take sig- Vice President, Singapore Business Group
generally maintains the same course as the pre- nificant time and effort. While Vietnam remains (SBG) in Ho Chi Minh City

APRIL 2021 | VIETNAM ECONOMIC TIMES | 13