With positive revisions in market access conditions and investment incentives, the draft Law on Investment is expected to open up broader opportunities for foreign investors in the Vietnamese market.
The draft law includes the list of business lines with conditional market access.
The bill, which amends the Law on Investment 2014 and will be discussed at the National Assembly’s eighth session next month, includes the two long-awaited changes regarding foreign investors that would institutionalize the Politburo’s recently-¬issued Resolution No.50-NQ-TW, which gives guidelines to the new FDI attraction strategy towards 2030.
The bill supplements the list of business lines with conditional market access for foreign investors. The list includes the business lines where foreign investors are not yet allowed to operate in, and others where they are only allowed to enter under certain conditions. For business lines not on the list, the conditions for market access for foreign investors are the same as for the domestic ones.
The government will adjust the list based on socio-economic development as well as laws and international treaties on investment. This is aimed to simplify procedures and increase transparency, as well as facilitate the country’s commitments on opening the market under new-generation free trade agreements (FTAs) and international treaties on investment which Vietnam has signed.
It also harmonizes Vietnam’s different FTA commitments having different market access approaches.
Once the draft law is approved, foreign investors will only need to look up the list without having to compare or check the conditions stated in the more than 10 FTAs and hundreds of related legal documents, as they currently do.
As for the second awaited change, the bill will add some sectors and investment activities eligible to investment incentives. Under the draft law, the new fields include research and development (R&D), manufacturing and trading of products as a result of scientific research, innovation activities, manufacturing of goods, among others.
The draft also proposes adding a mechanism allowing the government to decide to add investment incentives and extend the schedule for existing investment incentives to encourage development of a sector, an area, or especially important projects. The added incentives cannot be higher than 50% of the current highest level, while the extension cannot be longer than the longest time period available.
These projects include new and expanded R&D centers, innovation centers with the total investment capital of VND6 trillion (US$260.87 million) or more, and projects in the sectors eligible for special incentives and with the total investment capital of at least VND30 trillion (US$1.3 billion).
Dang Huy Dong, former Deputy Minister of Planning and Investment, said the amendment of the Law on Investment 2014 is necessary to keep up with rapid changes in the market, especially the capital market.
“We have seen new businesses models based on innovation, Industry 4.0, and the sharing economy emerge in bigger numbers. The regulatory changes aim to attract higher-quality foreign-invested projects which will better serve national development,” Dong said.
“However, we cannot increase the quality of FDI if our business conditions and investment incentives are not up to speed. For this, the supplement of the list of conditional business lines for foreign investors is a new positive development,” he added.
According to Vu Dai Thang, deputy minister of Planning and Investment, the amendment aims to institutionalize the Party’s recent resolutions on the development of the private sector and to improve the policies and legal framework to increase the quality of FDI and the efficiency of FDI attraction by 2030.
“The amendment will focus on improving the regulations on conditional businesses and conditions, the removal of unnecessary and unreasonable conditions, the simplification of administrative procedures, and increasing the efficiency of state management and transparency, while ensuring consistency with other laws,” Thang said.