In October 2020, the Ministry of Planning and Investment (MPI) published a draft decree implementing the Investment Law 2020 (Investment Decree). The Investment Decree will replace Decree 118/2015 implementing Investment Law 2014. Some major changes provided in the Investment Decree are discussed below:

· Government guarantee - The Investment Decree clarifies that the investment assurance under Article 11.2 of the Investment Law 2020 may include (1) guarantee on foreign exchange availability, and (2) guarantee on contractual performance by Government authorities or State-owned enterprises. The clarification seems to revert to the provisions under Investment Law 2014 on government guarantees, which are removed in the Investment Law 2020.

However, it is not clear if the Government can issue such clarification in form of a government Decree since the Investment Law 2020 does not allow Government authorities to provide investment incentives to investors which are not provided in the Investment Law 2020 without the National Assembly’s approval. Guarantees on foreign exchange availability and contractual performance could also be viewed as a type of investment incentives.

· Negative list of investment conditions for foreign investors – To implement the “negative list” approach under the Investment Law 2020, the Investment Decree includes a list of sectors and businesses which are conditional to foreign investors. Under the Investment Law 2020, any sector or business not included in the negative list will be open to foreign investment. This approach will provide more certainty to foreign investors. However, the list attached to the Investment Decree includes “new sectors or businesses which have not been conducted in Vietnam” on 1 January 2021. This catch-all item effectively allows the authorities to deny market access by foreign investors if they consider a sector or business is new and has not been conducted in Vietnam.

· Applicability of negative list – The Investment Decree provides that the investment conditions provided in the negative list apply to a foreign investor or some foreign invested enterprises (FIEs), which are controlled by foreign investors. This seems to suggest that a foreign-invested enterprise that is not controlled by foreign investors is not required to comply with the investment conditions provided in the list. The Investment Decree also makes clear that if there is no condition under Vietnamese law for a sector or business in the negative list then the foreign investors will be treated as domestic investors.

· Clarifications of projects entitled to investment incentives – The Investment Decree provides more details about the types of investor projects which are entitled to investment incentives under investment regulations such as start-up project, supply-chain investment project, or SME incubator projects. The draft Investment Decree also requires investors in projects which are entitled to special investment incentives to give an undertaking about the project capital contribution schedule and investment schedule in the investment registration certificates, investment policy decisions, or in an agreement with Government authorities.

· Earlier timing for the deposit for investment projects – The draft Investment Decree proposes to require an investor to make the required investment project before approval of the land compensation plan instead of before hand-over of the land.

· Investment projects with 70-year term – An industrial project which has a total investment capital of VND 6,000 billion or more and has a depreciation time of 10 years or more can have an investment term of 70 years instead of 50 years.

· Investment project with no extension of the term – The draft Investment Decree provides that the term of investment projects whose energy efficiency is below 85% of the designed efficiency will not be extended.

· Investment capital audit – The draft Investment Decree now provides for procedures for investment authority to audit the value of capital contributed by the investors. Under Decree 118/2015, there are only procedures to audit the technology of machinery used by the investors.

· A requirement for minimum capital investment - Under the draft Investment Decree, a provincial People’s Committee may require investment projects which require lands from the State to have a minimum capital investment based on the amount of land required.

· Investment procedures for projects located in multiple provinces – The draft Investment Decree now has specific procedures for issuing investment policy decisions or investment registration certificates for projects which are located in multiple provinces (e.g., roads or pipelines).

· Online registration procedures – The draft Investment Decree provides for detailed procedures for the investors to register an investment project online similar to the online registration to establish a company under the Enterprise Law. The Investment Decree also provides for procedures by which an investor can return an investment registration certificate if the investment project is not required to obtain an investment registration certificate in the first place.

· Merger and split of an investment project - The draft Investment Decree introduces the concept and procedures for merging or splitting an investment project similar to merging or splitting a company. However, it is not clear how these procedures and concepts could work in detail since an investment project is not a legal entity and does not have clear boundaries.

· Making capital contribution by an investment project - The draft Investment Decree allows the investor to contribute an investment project as equity capital to another company which will replace the original investor as the investor of the investment project. The draft Investment Decree also allows an investor in an investment project to implement the investment project via a business cooperation arrangement. However, since the concept of business cooperation is not clear, it is not clear how this arrangement will work.

This post is written by Nguyen Quang Vu.

Vietnam Business Law