Why foreign company should undertake policy and regulatory research before entering Vietnam market?

Currently, with Vietnam’s investment attraction policies, annual foreign direct investment (FDI) into Vietnam is constantly increasing, after Covid time. According to the report on foreign direct investment in nine months of 2021 of the Ministry of Planning and Investment, as of September 20^th, 2021, the total newly registered capital, adjusted and contributed capital to buy shares, purchase capital contribution (GVMCP) of foreign investors reached 22.15 billion USD, up 4.4% over the same period last year 2020. Realized capital of foreign investment projects is estimated at 13.28 billion USD, down 3.5% over the same period in 2020.

 

Law firm in Vietnam

However, when entering a new market, especially the business environment of a developing country like Vietnam, foreign company always have to be cautious and should undertake research investment environment and target company for M&A, or business cooperation carefully. Besides socio-cultural factors, the differences in political and legal factors are important issues. In particular, it is really necessary to study policies and legal regulations before investing in order to mitigate risks when operating in the Vietnam market.

Each country has its own policies and independent legal system to manage domestic company as well as foreign company. Therefore, when foreign investors wish to invest in Vietnam, they need to learn about legal policies that affect their expected business activities. Specifically, through the study of laws, economic policies… investors will identify constraints as well as incentives for their expected type of investment. Foreign investors will have more proactive preparation steps and have a basis to consider the benefits and potential risks when making an investment in Vietnam.

Firstly, on the legal system related to investment activities, Vietnam has a fairly complete but complex regulatory legal system. Due to too many types of legal documents being issued, overlapping, inconsistent and inconsistent jurisdictions are quite difficult obstacles for foreign investors when penetrating the Vietnamese market. Therefore, studying the regulatory is necessary and really a big challenge for foreign investors.

Specifically, for the investment, Vietnam law only allows foreign investors to do business in a number of industries that satisfy market access conditions. Therefore, foreign investors need to learn specific regulations on conditions of establishment, capital contribution, capital contribution ratio, etc. to have a plan to prepare capital, and to choose the type of investment in accordance with the regulations of Vietnam law and expected investment scale.

In addition, foreign investors also need to learn about the regulations on the organization of different types of businesses in Vietnam. It will be the basis for foreign investors to determine the level of capital contribution, rights and obligations when participating in investment. From there, foreign investors will have reasonable considerations and considerations in line with the investment plan, avoiding passive situations or the establishment and capital contribution not achieving the set goals before investing.

Second, about policies for foreign investors, investors need to study policies related to tax i.e. corporate income tax rates, tax rates for personal income taxes, and policies. avoid double taxation between Vietnam and other countries in order to comply with tax obligations and ensure its interests in the process of conducting investment in Vietnam.

Furthermore, to ensure cash flow transactions, foreign investors need to have an understanding of Vietnam’s foreign exchange policy. Understanding the bank’s foreign currency buying and selling policies will help foreign investors flexible in implementing project activities. Policies and regulatory understanding in international bidding or bidding or goods or service supply service for state owned company are also matter of concern.  Labor policy is also an information that foreign investors need to know to ensure that the recruitment and payment of salaries and benefits are consistent with the policies of the state. Economic and financial policies are regulated by the State in each period such as policy on funding or lending capital, tax policy of the State, economic policy on foreign relations, foreign policy.

Policies, laws and politics have a great influence on investment activities in Vietnam. Through legislation, the state institutionalizes economic undertakings and policies into law, with provisions that are universally binding for all business activities. The legal regulations and policies related to foreign investors in Vietnam are very complicated and changing over different periods. Therefore, before investing in Vietnam, investors need to learn, check the information and the authenticity of the information collected to ensure the authenticity and validity of those regulations and policies.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

ANT Lawyers – A Law Firm in Vietnam with international standard, local expertise and strong international network. We focus on customers’ needs and provide clients with a high quality legal advice and services. For advice or services request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529.

 

Read More

Vietnam and Japan cooperate for mutual development

On November 25^th, 2021, within the framework of Japan visit of Vietnamese Prime Minister – Mr. Pham Minh Chinh, the Prime Minister met the President of the Japan External Trade Organization (JETRO). During the meeting, the Prime Minister met leaders of many large Japanese corporations, businesses and banks and signed many investment cooperation agreements between Vietnam and Japan.

 

Law Firm in Vietnam

The parties highly appreciated JETRO’s practical and effective contributions to Vietnam in recent years in promoting investment cooperation. In the 10 months of 2021, Japan ranked 3rd among countries making investments in Vietnam, with a total registered investment capital of nearly USD 3.4 billion. Up to now, Japan is the second largest investor in Vietnam with over USD 63.9 billion (accounting for 15.8% of total FDI investment).

Vietnam encourages Japanese businesses to invest and set up company in Vietnam, apply investment registration certificates in Vietnam, expand investment cooperation in infrastructure, energy, manufacturing industry, high-quality agriculture, information technology, smart cities, financial and banking services, and banking, innovation. The Government is committed to accompanying the business community, supporting and creating all favorable conditions for business investment activities on establishment of company in Vietnam, bringing about more benefits for the parties, contributing to bringing Vietnam-Japan relations to a new level.

During this visit, the two countries signed more than 40 cooperation agreements with a total investment value of more than USD 3 billion. In addition to investment commitments, during this visit, there were many cooperation agreements on human resource training or other environmental protection solutions signed between ministries, sectors and businesses.

In the meeting, the Prime Minister of Vietnam also met and discussed with leaders of Nippon Foundation, MUFG Group, INFRONEER Group, JBIC Bank, Idemitsu Group and Mizuho Bank on market development, business, human resource training.

The Prime Minister shared with the difficulties of Japanese businesses in Vietnam over the past time, he said that Vietnam has changed to a safe and flexible adaptation, effectively controlling the epidemic. The competent authorities at all levels must discuss with businesses and citizen to deploy solutions appropriate to the situation, bring life back to normal, both open production and business, and effectively prevent epidemics. Vietnam also suggested that Japanese businesses corporate with Vietnamese in epidemic prevention and control, continue to contribute to improving institutions, training human resources, investing in hard and soft infrastructure, and cooperating in areas such as: climate change response, digital economy, green economy, circular economy…

In addition, to ensure investment and trade, Vietnam is expected to start reopening international flights in early December, including flights to Japan. This will make it easier for Japanese investors to make investment, market surveys, and deploy their investment projects.

By the visit, Vietnam wishes to further develop cooperation in investment, human resources and diplomacy with Japan, thereby creating favorable conditions for investors of the two countries to expand their business, form company in Vietnam and contribute to national economic development.

ANT Lawyers – Law firm in Vietnam with international standard, local expertise and strong international network. We focus on customers’ needs and provide clients with a high quality legal advice and services. For advice or service request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529.

 

Read More

The Need for Commercial Mediation in the Performance of International Contracts

In contract dispute resolution, the average time to resolve a commercial contract dispute at the Court in Vietnam, even with the help of dispute lawyers in Vietnam whom know well the process would take long time through multiple proceedings. This period will last longer if there is a foreign party in the dispute, including service of notarization, legalization, authentication (or apostille) the documents. According to World Bank statistics, the cost of resolving a commercial dispute at the Court accounts for about 29% of the contract value (including attorneys’ fees, court fees, judgment execution fees).

 

Contract dispute lawyers in Vietnam

The practice of resolving the dispute case at the Court appears to face many challenges of time lengthening and possible effective enforcement leading to cost of time and money. Therefore, the selection of dispute resolution in the mediation center is a possible option to resolve this issue.

Vietnam authorities and international agencies have taken active measures needed to promote the application of commercial mediation in international contracts, in order to resolve issues more quickly and effectively in international trade disputes. The application of commercial dispute resolution at mediation centers in Vietnam will save time and costs for dispute resolution. In addition, the dispute resolution at the mediation center will also help the parties maintain the relationship for future business transactions.

Until Aug 2019, in Vietnam, there are 7 commercial mediation centers licensed by the Ministry of Justice with a team of domestic and international certified mediators and lawyers who can contribute to resolving disputes in international trade contracts. The use of mediation centers in the settlement of disputes in Vietnam with the help of lawyers in Vietnam will help the parties to find common grounds and together save cost, time, keep confidentiality of the dispute and could continue to do business with each other.

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers have Dispute Attorneys in Hanoi, Ho Chi Minh City and Danang, will help customers conveniently drafting contracts and assist in resolving contract disputes in Vietnam.

 

Read More