Under the Investment Law, an investment project means “…a collection of proposals for the expenditure of medium and long-term capital in order to carry out an investment activity in a specific geographical area and for a specified duration …”
There are various uncertainties from the definition of an “investment project”:
- By using the word “proposal”, the law seems to suggest that an investment project is a plan not a physical thing. However, the definition does not make clear to whom and by whom the proposal should be made and how the proposal will be implemented or adjusted.
- When the law refers to “transfer of an investment project” then it is not clear whether this means the transfer of the proposal or transfer of the underlying assets of such projects or transfer of the capital in the project company.
- It is not clear if a reference to “project location” at law is a reference to the geographical area in the definition of investment project or a reference to the head-quarter of the project company.
- It is not clear if a reference to “foreign-invested project” a reference to an investment project of which the project company is owned by a foreign investor or to an investment project which is financed by foreign capital including funds from a foreign lenders.
- The term “capital” could broadly include loan capital or equity capital. However, if the term capital includes “loan capital” then this would require all loan transactions to be subject to investment procedures under Vietnamese law.
- There is no clear distinction between the implementation of an investment project and the activity of the project company. This often results in action by a project company to be subject to both provisions of the Enterprise Law regulating the activities of a company and the provisions of the Investment Law regulating the implementation of an investment project.
- In an M&A transaction when an investor acquires shares in a project company from an existing investor then it is not clear whether the share purchase activity by the purchasing investor or the activities of the project company is considered an investment project.
In short, the concept of investment project under Vietnamese law is far from clear. This results in unclear and overlapping procedures between the Investment Law and other laws. It would be better and clearer for potential investors if this concept is replaced with a more specific definition (e.g. concession or development rights).