Implementing the decree in the context of liberalising investment related activities and mobilising all resources, during the drafting process, MPI, together with experts from other ministries and agencies, sought ideas from the business community, international organisations, and international lawyers in Vietnam. On 26 and 28 August, the Prime
Minister shared his time with the drafting committee to thoroughly go over the draft and to give his opinion. “We want to overcome any shortcomings to optimise investment conditions in Vietnam,” said Mr Vo Hong Phuc, Minister of Planning and Investment.
“With this decree I hope that investors will have better investment conditions and that more foreign investors will come to Vietnam.”

Vietnam has finished bilateral negotiations with the EU, so the latter is aware of the articles in the decree. The US suggested a deadline of September 30 for getting the decree up and running. The Drafting Committee has borne in mind the demands of integration in compiling the decree.

The draft of the decree was changed many times, in order to guarantee it provides better administrative procedures for investors. New reforms will be applied under the decree, initially in regulations relating to administrative reform in the granting of investment licences. 

MPI previously appraised and granted investment licences. The government’s decentralisation policy is in place but only at a low level, so cities and provinces only had the right to grant licences for foreign invested projects of less than $5 million. In 2000 the limitation was increased to $15 million in Hanoi and Ho Chi Minh City. In the decree, all projects, be they small or large,  and not in restricted sectors, can be allowed by provincial committees.

Decentralisation is a common feature of administrative reform. It will enhance the role and responsibility of each provincial committee in investment management. It is a major policy move, creating conditions for a “one stop shop” approach to allow investment to be carried out smoother and faster. Decentralisation also helps ministries and agencies, especially MPI, to concentrate more on macro policies and master plans, providing information, forecasting and investigating investment activities, etc. State offices will operate in accordance with their functions, eliminating the “ministry in charge” concept and making enterprises operate under the law rather than being controlled by this “ministry in charge”.

Changes are also in the wind for projects requiring consideration by the Prime Minister. Whereas previously he had to consider specific projects, now he merely considers whether a project is inside or outside of the plan, whether the plan is clear and whether the plan assesses the effect of the project. In short, it the project is within the plan, investors do not need to submit it to the Prime Minister.

An important factor is to create a restricted list of sectors for foreign investors. “We had a lot of limitations in the past but they were not based on any specific legal foundation, and so were unclear,” said Mr Dung, “This time we have announced 14 restricted sectors in accordance with Vietnam’s international commitments.” Restricted and prohibited sectors are regulated in Articles 29 and 30 of the Investment Law and a list of restricted sectors for foreign investors can be found at Appendix C.

For “sensitive sectors”, MPI has put forth “fundamental commitments”, not any specific solutions or conditions. “It depends on the economy’s absorbability and management solutions to decide whether Vietnam opens up these sectors to foreign investors or not,” Mr Dung explained. 

Investment incentives are also adjusted in the decree. Incentives regarding subsidies in exports, localisation ratios, technology transfer, and material zone development have been removed because they violate agreements relating to “trade related investment measures”. “The preferential sectors are based on economic development targets and they often change, although incentive measures are stable,” said Mr Dung “The state’s interests can be satisfied to support enterprises, so the incentives are mainly regarding taxation.”

A common list of preferential sectors and areas will be applied instead of numerous regulations on investment incentives. These incentives are regulated in the investment licence to ensure long standing, stable operations for investors.

Foreign invested sectors and forms of investment are enlarged in scope by the decree. Vietnam did not previously permit foreign investors to establish joint stock companies, take over Vietnamese companies, or buy them under MNA forms. The new decree regulates the specific percentage and forms of purchasing, providing more open business conditions.

It also specifically regulates the roles and responsibilities of each ministry and agency regarding investment activities.

Under Article 42, for domestically-invested projects, those of less than VND15 billion and not in restricted sectors do not have to undertake any procedures. Those between VND15 billion and VND300 billion, as regulated in Article 43, must undertake the investment registration procedures regulated in Article 40. This registration procedure replaces the licence granting procedure.

To implement the Investment Law, apart from the new decree, other decrees will be required such as one on BOT, BTO, and BT forms of investment, Vietnamese investors investing overseas, and on changing foreign invested enterprises’ operation to a form governed by the Corporate Law and Investment Law. Existing decrees, of course, need to be improved. “When Vietnam integrates into the world, international regulations and laws will influence its legal system,” said Mr Dung.