Position paper on expectation of foreign investors willing to invest in Vietnam and recommendations to improve foreign investment in Vietnam

1. Position paper on expectation of foreign investors willing to invest in Vietnam and
recommendations to improve foreign investment in Vietnam
Oliver Massmann
Considering Vietnam’s recent deep integration into regional and world’s economy, foreign investors
are very optimistic about their business development in Vietnam in the upcoming time. Despite
having said that, there remain hurdles that discourage foreign investors when deciding to invest in
Vietnam or other countries in the region, for example, Thailand, Indonesia and Myanmar. These
hurdles are discussed in details below.
Integrity
It is an area of great concern despite recent Government efforts to combat it. Our recent small-scale
surveys shows that ratio of unofficial payment or facilitation payment in a firm’s revenue is increasing
over the years. Government officials are still causing a lot of troubles in case of refusal to pay the
facilitation fee by enterprises. Most of the cases result in delay in receiving Government’s services or
even being refused to be provided the services. Enterprises are deeply concerned about these issues, as
they have to suffer from loss of business opportunities, which in turn becomes financial loss.
Unfortunately, some enterprises participating in our survey express their losing of confidence that the
situation will be improved before the next 10 to 20 years.
Access to information
It is of utmost importance that foreign investors get to understand the country they are going to invest
in and its surrounding factors. However, public available information is limited while it takes a lot of
time and money to get such information, for example, shareholders information, corporate structure,
financial status, etc. of a company. In addition, the fact that information is not always available in
English or other common languages causes discomfort to investors. While the websites of many
Government authorities are in both Vietnamese and English, the English interface is very limited in its
contents compared with its Vietnamese one. The same applies for legal documents.
Compliance
Compliance is a burden for not only Vietnamese but also foreign-owned enterprises. The bigger the
size of an enterprise is, the more likely and frequently that it is subject to examination and supervision
procedures from many levels of several Government authorities. One enterprise could receive at least
2-3 delegations per year to check its operation status, for example, tax, labour, firefighting and
prevention, police, etc. In some cases, the scope of examination repeats.
Foreign invested enterprises also face a burden of having to comply with many administrative
procedures, especially those in real estate, customs, fire prevention and safety, environment
protection, labour and tax sectors.
Infrastructure

2. Energy production is of key concern, especially renewable energy. There is so much delay by the
Prime Minister in issuing guiding documents for foreign investors to develop renewable energy in
Vietnam, despite Vietnam’s urgent need of electricity for growth. Feed-in-Tariff rates are not
attractive enough to investors. EVN’s monopoly is still a big hurdle.
Intellectual Property (IP)
Enforcement of IP rights is not assured and remains a concern for foreign investors. Legal sanctions
must be much more severe and strengthened.
Enforcement of foreign arbitral awards
The reality is that the arbitration law is being ignored in Vietnam. The percentage of annulled foreign
arbitral awards is high due to the matter of practice that the recognition and enforcement of foreign
awards in Vietnam are almost impossible. When arbitration is being used more frequently in disputes,
it is disappointing that the arbitrators’ decisions have not yet been duly respected. It must be made
clear in terms of fundamental principles based on which arbitration awards could be set aside.
Investment in education sector
Legal capital for investing to establish high schools and universities are heavenly high (VND50
billion and VND300 billion respectively). This discourages many investors from countries with high
educational reputation. This is not good for Vietnam especially when the young now needs better
education than ever before.
House ownership and land use right of foreign invested enterprises and foreign individuals
The law is very unclear and inconsistent as to land regime applicable to residential houses sold to
foreign invested enterprises. In addition, while the Law on Residential Housing already allows foreign
individuals to purchase property in Vietnam, there is no clear procedure to grant the red book to such
individuals. We have seen a huge demand from foreigners to buy houses in Vietnam, but their
intention is damaged due to lack of procedures to acknowledge their ownership right.
Vietnam’s restrictions on imports of used machinery and equipment
Restrictions on imports of machinery and equipment based on any arbitrary time standard must be
removed, administrative procedures to ensure compliance with international standards of safety,
energy savings and environmental requirements must be simplified and incorporated into the National
Single Window project, and any quality standards must be based on international standards.
Otherwise, it would cause delays in customs processing, impact the modernization and
industrialization process of supply industries and be not in accordance with the WTO Technical
Barriers to Trade Agreement (Article 2.2) or the TPP Chapter on Technical Barriers to Trade.
Privatization of state-owned enterprises – in name only

3. State-owned enterprises have long played an important role in Vietnam’s economy. These enterprises
have operated in an inefficient manner compared with private companies, many enterprises operating
at loss for several years. Therefore, the Government has conducted several rounds of state-owned
enterprises reform. However, setting aside the ambitious target of 289 state-owned enterprises to be
privatized in 2015, the privatization process has been very slow and only by name. Only 5%- 20% of
the shares are offered for sale, which is too low to attract foreign investors. They will be reluctant to
invest in these enterprises as long as they have no chance to gain decision-making power by purchase
of shares. The Government must then show stronger effort and commitment in reforming state-owned
enterprises to attract more foreign investment in the process.
Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any
questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris
Vietnam LLC.