Vietnam Issues Guidance on Law of Investment: Decree 31
- Vietnam issued Decree 31, which provides guidance on business lines subject to market access restrictions for foreign investors.
- The Decree offers clarity on a number of items in the Law on Investment and replaces several other decrees such as Decree 118 and Decree 83.
- Vietnam Briefing highlights the key points including a prohibition and market entry list.
The Vietnamese government in March issued Decree 31/2021/ND-CP (Decree 31), which provides guidance on the implementation of the new Law on Investment, which took effect in January 2021. Decree 31 became effect on March 26, 2021.
Decree 31 sets out a list of business lines where foreign investors are subject to market access restrictions. These business lines are further divided into two: the Market Entry list and the Prohibition List.
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There are 58 sectors where foreign investors must satisfy certain conditions to enter the market; 25 sectors are completely closed to foreign investments. Moreover, under Decree 31, any project can be terminated, as a whole or in part, if accused of making fraudulent transactions, pursuant to a court judgment.
The recent changes under the new legal framework are part of the Vietnamese government’s efforts to improve competitiveness in its market, attract foreign investors, and develop a more user-friendly government e-system.
The market entry list and prohibition list
Decree 31 stipulates two lists of business sectors: one, where foreign investors are not allowed to participate under any circumstances (prohibition list), and another, where foreign investors must satisfy certain market entry conditions to invest (market entry list).
In case a foreign investor holds investments in multiple sectors in the market entry list – all the conditions in each sector must be fulfilled. The details of the market access conditions will be summarized by the Ministry of Planning and Investment (MPI) through the National Portal on Foreign Investment.
If there is no market entry restriction, then the foreign investor is treated as if they were a domestic investor — no restrictions on foreign ownership.
Guarantee of investment incentives in case of changes to the law
If there are revisions to existing legislative documents, which lead to changes to investment incentives being applied to investors before the effective date of the revisions, then these investors will have their investments guaranteed, in accordance with Article 13 of the Law on Investment.
Investment incentives include those specified in:
- The investment license;
- Business license;
- Enterprise license;
- Investment certificate; or
- Investment registration certificate.
Decree 31 is a welcome document providing details and clarity on the investment law in Vietnam. Foreign investors should study the decree carefully before planning their market entry and ensure they do thorough due diligence to protect their investments. As Vietnam can be a challenging but vibrant market, investors can hire a professional firm to help ease their market entry into the country.