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COVER STORY

eign investors will be treated as domestic general expenditure, make loan registration
investors for the purpose of investment. Ms. and repatriation difficult and time consuming,”
Chew emphasized that the “Negative list” he went on. “Then there is tax reform with
approach is a significant step in improving regard to protecting taxpayers who have fol-
transparency and consistency in the foreign lowed the spirit of the law and where there
investment process. has been no loss to the Vietnamese treasury.
The law also provides clearer guidance We constantly see tax officers create difficulties
on when foreign investors must obtain M&A and apply punitive penalties on taxpayers
approval for investment in a Vietnamese that have made minor errors that have no
target. “M&A approval is no longer required consequence for the tax paid to the State, but
The LOI and the LOE when the potential investment does not where the inspection process is neither trans-
2020 contain more increase the percentage of foreign ownership parent nor appropriate.”
in the target company,” she explained. “This
EuroCham has recommended the gov-
progressive changes, and are provision reduces time and cost for potential ernment continue its positive path of reform,
probably not as significant as foreign investors.” as Vietnam’s business environment has
earlier LOI’s were, but these “The introduction of new investment become more open and attractive for inter-
are still important and show incentives, through an expanded form of national investors over the last few decades.
the government’s commitment incentives and incentives for projects with a “In particular, we welcome the simplification
to improving the investment large socio-economic impact, is also certainly of business conditions, the streamlining of
administrative procedures, and the modern-
attractive to foreign investment. While the
and corporate environment.” LOI 2020 introduces some favorable condi- ization of the legal framework,” said Mr.
tions, the increase in foreign ownership Nicolas Audier, Chairman of the European
MR. MATTHEW LOUREY, thresholds and increased scrutiny over nom- Chamber of Commerce in Vietnam. “This,
Managing Partner, Acclime Vietnam inee arrangements do present more difficulties combined with the government’s digitalization
for foreign investors. Nonetheless, even with drive, will help attract new international
stricter requirements in certain circumstances, investors in the future.”
the updated regulations contribute to a more Of a similar mind, Ms. Chew suggested
for investment because of its favorable business stable and investor-friendly environment.” there remains a need for changes that create
environment. a more investor-friendly environment. “A
“The LOI removes 22 business lines, includ- Continued reform needed few of these changes include the further revi-
ing franchising, logistics services, commercial Presenting a more stringent approach to sion of laws and regulations to streamline
arbitration, debt trading services, shipping improve the quality of foreign investment the current cumbersome system, the negoti-
agency services, medical equipment inspection activities in Vietnam and protect national ation and execution of regional and global
services, and aesthetic plastic surgery services, defense and security, the new LOI proves the trade agreements to draw in foreign investors,
offering foreign investors more opportunities government’s efforts to attract more FDI and and increased protection for international
to invest,” said Mr. Marko Walde, Chief Rep- its desire to make Vietnam an investment- intellectual property rights and other pro-
resentative of the Delegation of German Indus- friendly country among foreign investors. prietary rights,” she said. %
try and Commerce (AHK) in Vietnam. “Fur- Despite the welcomed improvements,
thermore, the new LOI includes new business there remain obstacles facing foreign investors
sectors and projects such as college education, that policy makers should address. “While
innovative startups, and R&D, which are encour- steps have been taken to improve foreign
aged for investment or entitled to investment investment procedures, investors still suffer
incentives. It can be seen as the foundation from a lack of transparency in legal and
for the country’s sustainable development.” administrative procedures,” Ms. Chew said.
A few key provisions of the amended “Consistency in the implementation of laws
investment law introduce more favorable and regulations is also an issue that impedes
conditions for foreign investors: the intro- the foreign investment landscape.”
duction of the unprecedented “Negative list” Speed and transparency are still pain points,
approach to market entry for foreign investors, according to Mr. Lourey. “We still need sig-
the slight reduction of ownership thresholds nificantly faster and more transparent
of foreign-invested enterprises (FIEs), the processes for investors to seek and be updated
clarification on merger and acquisition (M&A) on applications when sectors require ministerial In an attempt to align
transaction circumstances that require approval, as at the moment if a sector requires with international
approval, the novel “national security” pro- such approval the process has no clear timelines commitments in investment
vision, new investment incentives, and stream- nor ways to monitor the process, which pro-
lined investment process and procedure. vides significant uncertainty for foreign activities, the LOI and LOE
The LOI 2020 has switched, for the first investors considering investment,” he said. introduce more favorable
time, to a “Negative list” approach regarding Apart from dealing with ministerial conditions for foreign investors
restricted business sectors for foreign approval for restricted sectors, two other and provide more transparency
investors, instead of the previous “Positive areas that cause concern among foreign regarding relevant legal and
list”; a move warmly welcomed by many ana- investors and require further attention are administrative procedures.”
lysts. The government will issue two lists of State Bank regulations on loans and funds
business sectors and lines that are restricted coming into Vietnam, and tax reform. “Many
and conditional for foreign investors. With of the requirements to track the use of funds, MS. ELAINE CHEW,
projects that do not appear on either list, for- when funds are injected for mixed use / Senior Associate, ACSV Legal

APRIL 2021 | VIETNAM ECONOMIC TIMES | 21