2,100 new enterprises established only in the first week of 2021, according to the Ministry of Planning and Investment. The number went up 46% from the same period last year since the 2020 Law on Enterprises began to take effect.
The enactment of the new law aims at 2 things - simplifying administrative procedures on investment and minimizing the entry costs for investors; however, it must first meet the preconditions of the state for foreign investment.
Prominent provisions of the new Law of Investment for foreign investors in Vietnam:
Article 9 of the new Law of Investment states 5 market access conditions for foreign investors, including the ratio of foreign investors’ ownership, the forms and scopes of investment, the required capacity in conditional industries, and participating partners.
The threshold of the foreign shares for foreign-invested enterprises (FIEs) has slightly decreased to less than 50%, compared to 51% in the previous law
12 conditional business lines have been eliminated, 19 occupations revised, and 6 more sectors added, including essential industries like the clean water business
For the first time, the Law on Investment puts a strong emphasis on the principle of equality in market access between domestic and foreign investors, giving foreign investors more leeway in accessing better markets, except for those restricted industries
Although the Vietnamese government has made tremendous efforts in improving the legal framework; however, the execution process still is relatively difficult to implement. For example, referring to the ratio of charter capital an investor owns in order to be considered FIEs, if it is clearly 50% or 51%, then the execution is much easier. However, for “difficult” cases, businesses that currently own 50.9% will face 2 scenarios: the business has either to reduce their ownership rate to less than 50% to enjoy the same conditions as a domestic enterprise or must follow procedures as a foreign enterprise.
The amendments have lifted unnecessary difficulties and encouraged innovations within organizations. It is crucial for investors to understand the Vietnam market with its new legal framework and business opportunities in this new scene. Let Broad Avenue Team spare your company the trouble of the complicated new laws and help cut short your journey to success, with our core team of professionals having Ivy-League background and 50+ years of experience in real estate, finance, and analysis!
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