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After more than three decades of opening up the market, Vietnam has achieved tremendous amounts of success in attracting foreign direct investment (FDI). FDI has made a large contribution to economic growth (GDP), investment capital, import-export, local budget revenue, and job creation. Vietnam has a stable economic growth rate over the years and is continuing to progress. Moreover, it has many advantages in terms of labor, so it attracts a relatively high number of foreign investors. Besides, the policy of integration and development is also increasingly focused on and promoted by the government. So, what types of foreign direct investment in Vietnam include, and what are the requirements? Let’s unravel foreign direct investment in Vietnam with Doanh Tri Law through the following article. 

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I. What is Foreign Direct Investment (FDI) 

FDI (Foreign Direct Investment) is a form of long-term investment by individuals or organizations from one country to another by setting up factories and business establishments. The purpose of this action is to achieve long-term benefits and take control of the business property.

To further explain the term FDI, the World Trade Organization defines: Foreign direct investment (FDI) occurs when an investor from one country (host country) acquires a residential asset. Another country (the country attracting investment) comes with the right to manage those assets. The management dimension is what differentiates FDI from other financial instruments.

In most cases, both the investor and the assets that he or she manages abroad will be the premises of the business. In such cases, the investor is often referred to as the parent company and the assets are referred to as subsidiary or subsidiary company.

II. Forms of Foreign Direct Investment in Vietnam 

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  1. Investment in establishing economic organizations

In accordance with Vietnam’s regulations on Investment (Law on Investment 2020), there are certain and specific conditions that investors must meet up if they wish to make an investment in Vietnam: 

  • Foreign investors establishing economic organizations must satisfy the market access conditions for foreign investors specified in Article 9 of this Law; Article 9 of the Law on Investment regulates the “Industry, occupation and market access conditions for foreign investors”. 

  • Before establishing an economic organization, the foreign investor must have an investment project and carry out the procedures for granting or modifying the Investment Registration Certificate, except for the establishment of a small and medium-sized business start-up. to create and fund creative start-ups in accordance with the law on SME support.

  • From the date of issuance of the Corporation Registration Certificate or other documents of equivalent legal validity, the economic organization established by the foreign investor is the investor implementing the investment project as prescribed in the Certificate of investment registration.

  1. Investment in the form of capital contribution, share purchase, purchase of capital contribution

Regarding the action of foreign investors' capital contribution, share purchase, or capital contribution purchase of economic organizations, foreign investors must satisfy the following regulations and conditions:

  • Market access conditions for foreign investors specified in Article 9 (Industry, occupation and market access conditions for foreign investors) of the Law on Investment;

  • Ensure national defense and security in accordance with the law and regulations on Investment;

  • Law on land on conditions for receiving land use rights, conditions for using land in islands, communes, wards, border towns, communes, wards, and coastal towns.

  1. Investment in the form of Business Cooperation Contracts (BCC contracts).

  • A BCC contract is signed between a domestic investor and a foreign investor or between foreign investors carrying out the procedures for issuance of an investment registration certificate as prescribed in Article 38 of the Law on Investment. So if foreign investors wish to sign a BCC contract with Vietnam investors, then they don’t need to register for a Certificate of investment. On the other hand, If the BCC contract is signed between foreign investors wishing to make an investment in Vietnam, then they must acquire approval of the Investment Certificate. 

  • The parties to a BCC contract establish a coordination board to perform the BCC contract. The functions, duties, and powers of the coordination board are agreed upon by the parties.

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To gain in-depth knowledge about foreign direct investment in Vietnam, please contact Doanh Tri Law Firm via:

Hotline: (+84) 911.233.955 - (024) 6293 8326

Email: luatdoanhtri@gmail.com

Our advisors are fully at your service in Hanoi and Ho Chi Minh City!

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