Foreign investors planning to invest in Vietnam need to consider whether the industry in which they intend to invest in Vietnam is a conditional business line or not. Under the law of Vietnam, there are two types of conditions applied, including: (i) Market access conditions for the foreign investors; and (ii) Conditions for doing business.
1. Market access conditions for the foreign investors[1]
The market access conditions for the foreign investors are pre-check conditions which will be evaluated by the investment registration authority of Vietnam before approving the foreign investment in Vietnam.
Pursuant to Article 9 of Law on Investment 2020, the foreign investors are entitled to the same market access conditions applicable to the domestic investors, except for the business lines included the list of industries and trades subject to market access restriction for the foreign investors promulgated by the Vietnamese Government. The list of industries and trades subject to market access restriction for the foreign investors is provided in Annex 1 of Decree 31/2021/ND-CP dated 26 March 2021 by the Vietnamese Government and may be easily reached on the National Foreign Investment Portal at http://dautunuocngoai.gov.vn. The list includes two groups:
- Restricted business lines; and
- Prohibited business lines.
If foreign investors invest in a restricted business line, they must satisfy all conditions applied. Subject to specific conditional business lines, the conditions may consist of part of or all the followings:
- Limitation of shareholdings percentage hold by the foreign investor in an enterprise;
- Investment method;
- Scope of investment;
- Capacity of the investors; partners participating in the investment activities;
- Other conditions specified in the laws and resolutions of the National Assembly, Ordinances and resolutions of the Standing Committee of the National Assembly, decrees of the Government and international agreements to which the Socialist Republic of Vietnam is a member[2].
If foreign investors invest in business lines without market-access commitment of Vietnam, but Vietnamese regulations do not restrict market access in those business lines, the foreign investors have the same market access as that of local investors[3].
2. Conditions for doing business
After passing the market access conditions, when conducting business in conditional business lines, the foreign investors must satisfy all business conditions in accordance with the applicable Law on Investment 2020 and ensure that those conditions for business investment are maintained throughout the course of their business operations. These conditions shall be applied generally to all organizations and individuals doing business in Vietnam, including foreign-invested enterprises and domestic enterprises. The list of sectors and industries subject to conditional business investment is specified in Appendix IV of the applicable Law on Investment 2020 and detailed in laws, resolutions of the National Assembly, ordinances and resolutions of the Standing Committee of National Assembly, Government decrees and international treaties to which the Socialist Republic of Vietnam is a signatory.
Examples of some conditional business lines include insurance business, security service business, casino business, petroleum business, alcohol business, etc[4]. Conditions for doing business to be fulfilled are those specified in[5]:
a) License;
b) Certificate;
c) Practicing certificate;
d) Credential;
e) Written confirmation or written approval;
g) Other requirements that must be satisfied by individuals and business entities to conduct business investment activities without obtaining written confirmation from a competent authority.
Corresponding to each conditional business line, its specific conditions may be scattered in several laws, decrees, circulars, decisions, etc. Before deciding to invest in Vietnam, we always suggest that foreign investors check whether the industries they intend to invest in Vietnam fall into conditional business areas, or consult with the local business law firms for professional advice.
[1] Law on Investment 2020, Article 9
[2] Law on Investment 2020, Article 9.3
[3] Decree 31/2021/ND-CP, Article 17.4
[4] Law on Investment 2020, Appendix IV.
[5] Law on Investment 2020, Article 7.6
