VietNamNet Bridge – Vietnam has been welcoming foreign investment for the last three decades. However, the concept of “foreign investor” remains unclear till now.
The inconsistency in defining “foreign investors” has been put on the table at the Vietnam Business Forum (VBF) which was held some days ago, on the threshold of the mid-term consultative group’s meeting.
Fred Burke, Head of the Manufacturing and Distribution Working Group of VBF, said the seemingly simple concept turns out to be more complicated than previously thought, which has put big difficulties for investors. The lack of a consistent concept about “foreign investors” has led to the different understanding about how to treat foreign enterprises.
The lawyer has pointed out that in many Vietnamese laws; there is no definition about the concept. As a result, different state management agencies have different ways of interpretation of the concept.
Some agencies believe that the enterprises with just one percent of foreign capital would be considered “foreign invested enterprises” and they bear the limitations in the national treatment and market access, stipulated in the agreements Vietnam has signed before when admitting to international institutions, including the World Trade Organization WTO.
In the Land Law, “foreign investor” is unofficially interpreted as the “enterprises with foreign invested capital.” Meanwhile, the concept is explained in the Investment Law and guiding documents as “the individuals or institutional investors, or the enterprises, where foreign capital accounts for at least 49 percent”.
The corollary of the inconsistency is that different state agencies and different local authorities make different decisions for the same matters. As such, the image about the investment environment in Vietnam has been described differently in the eyes of investors.
Also according to Fred Burke, there has been a suggestion that the enterprises with 10 percent foreign owned capital would be considered “foreign invested enterprises.” Nevertheless, 10 percent is not a convincing percentage, which pay put big difficulties to the operational enterprises.
At VBF, foreign investors also complained about the complicated administrative procedures they have to follow when doing business in Vietnam. The Land Working Group of VBF cited a lot of formalities applied to the enterprises in the real estate sector.
In order to obtain the investment licenses in the field, investors would have to prove that they can satisfy all the requirements stipulated in the Real Estate Business Law and relating guiding documents.
However, the Decree No. 71 which guides the implementation of the Housing Law, stipulates that in order to obtain investment licenses, the investors must get the written approval from competent agencies. However, in order to obtain the document, investors have to show the document recognizing them as the projects’ investors. And in order to have that document, investors need to have the investment certificate which shows the business fields.
Meanwhile, there is a better solution to treat foreign investors in the field that a “one stop shop” mechanism should be organized, which would be the only place the investors have to contact to obtain necessary documents for their investments.
According to the Foreign Investment Agency, the real estate sector attracted 1.57 billion dollars worth of foreign direct investment capital in the first five moths of 2012, amounting to 29.6 percent of the total FDI registered capital. The proportion is much higher than the 5.8 percent in 2011. The projects include the joint venture between Japanese Tokyu Group and Vietnamese Becamex with the registered capital of 1.2 billion dollars.
Nguyen Mai, Chair of the Vietnam Foreign Invested Enterprises’ Association, said the figures show the big interests of foreign investors in the Vietnamese real estate market, though it is frozen now.