Vietnam Flag Vietnam

Investment Climate 2018

The following information was published in the 2018 Investment Climate Statements by the United States Department of State's Bureau of Economic and Business Affairs on 19 July, 2018 and was last updated by World Trade Press on Monday, July 1st, 2019. Additional information is available at

Executive Summary

In 2017, Vietnam attracted a record level of foreign direct investment (FDI) of USD 17.5 billion, an 11 percent increase from 2016. Continued strong FDI inflows are due in part to ongoing economic reforms, a young, and increasingly urbanized, population, political stability, and inexpensive labor. The country remains one of the few in Southeast Asia with sustained manufacturing growth. Vietnam hosted the Asia Pacific Economic Cooperation (APEC) meetings in 2017, which put a spotlight on its regional economic integration and improvements to the business climate. Internal factors such as a sustained budget deficit, a weak domestic sector that has low linkages to the global supply chain, falling productivity, and a financial sector overburdened by non-performing loans all added to pressures for reform.

Vietnam experienced a shift in FDI from the high-tech sector to energy in 2017 as Vietnam estimates it needs USD 170 billion in additional energy infrastructure to meet its growing electricity demand, which the Ministry of Industry and Trade (MOIT) estimates will grow at a rate of 10 percent to 12 percent a year. As a result, the energy sector dominated FDI inflows, including Nghi Son 2 Build-Operate-Transfer (BOT) project (USD 2.8 billion), Van Phong 1 BOT project (USD 2.6 billion), Nam Dinh BOT gas-fired power plants (USD 2.1 billion), and the Block B-Omon pipeline (USD 1.27 billion). In addition, other significant non-energy investments included Samsung Display, which increased its investment by USD 2.5 billion.

Despite strong FDI inflows, significant challenges remain in the business climate, including corruption, a weak legal infrastructure and judicial system, poor intellectual property rights (IPR) enforcement, a shortage of skilled and productive labor, restrictive labor practices, and impediments to infrastructure investment.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 107 of 175
World Bank’s Doing Business Report “Ease of Doing Business” 2017 68 of 190
Global Innovation Index 2017 47 of 128
U.S. FDI in partner country (USD M USD, stock positions) 2016 USD 1,492 million
World Bank GNI per capita 2016 USD 2,060

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Vietnam continues to welcome FDI and foreign companies play an important role in the economy. According to the Government Statistics Office (GSO), FDI exports accounted for 73 percent of total exports in 2017 (an increase of 47 percent since 2000), while the contribution from foreign companies toward overall GDP increased from 13 percent to 21 percent over the same period. Improvements in the business environment, including economic reforms intended to enhance competitiveness and productivity, helped drive FDI inflows. Vietnam improved its ranking in the World Bank’s Doing Business Index (from 82 in 2017 to 68 in 2018) and World Economic Forum’s Competitiveness Index (from 60 in 2016 to 55 in 2017). According to the 2018 Organization for Economic Co-operation and Development (OECD) Investment Policy Review, Vietnam has an average level of openness compared to other OECD countries, though it is second to Singapore within ASEAN. OECD ranked Vietnam’s openness to FDI as higher than that of South Korea, Australia, and Mexico.

Vietnam seeks to move up the global value chain by attracting FDI in sectors that will facilitate technology transfer, increase skill sets in the labor market, improve labor productivity, and target high-tech, high value-added industries with good environmental safeguards. Assisted by the World Bank, the government is drafting a new FDI Attraction Strategy for 2030. This new strategy is intended to facilitate technology transfer and environmental protection, and will supposedly move away from tax reductions to other incentives, such as using accelerated depreciation and more flexible loss carry-forward provisions.

Vietnam’s business climate-related legal reforms also facilitated FDI inflows. The 2017 Provincial Competiveness Index (PCI), which ranks provinces by transparency and business facilitation, cited several positive regulatory changes, including Decree 78, issued in November 2015, which expanded online business registration, greatly reduced the required business registration documents, and reduced the time required to issue the Enterprise Registration Certificate (ERC) from five days to three. The waiting time to register and open a foreign-invested enterprise (FIE) has also steadily decreased in recent years. In 2017, the government modified the 2014 Investment Law to reduce the number of banned provisional sectors, and it enabled existing operations to shift more easily into new business activities not listed in their original ERC. As a result, the PCI found FIEs were able to obtain an investment license and complete their business registrations in half the time it took in 2010. According to the Ministry of Planning and Investment’s (MPI) Authority Business registration national database, the average time to register a company was only 2.36 days in 2017.

Although there are foreign ownership limits (FOL), the government does not have laws discriminating against foreign investors; however, the government continues to favor domestic companies through various incentives. Regulations are often written to avoid overt conflicts and violations of bilateral or international agreements, but in reality, U.S. investors feel there is not always a level playing field in all sectors. In the 2017 Perceptions of the Business Environment Report, the American Chamber of Commerce (AmCham) stated: “Whether a result of corruption, protectionism, or the government trying to pick winners and losers, our members often see areas where inconsistencies, inefficiencies, and unfair practices persist. We believe that it is vital that laws and rules are enforced fairly and equally. Better results in this area will improve the trust that people have in their decision makers.”

MPI oversees an Investment Promotion Department to facilitate all foreign investments, and most of provinces and cities have investment promotion agencies. The agencies provide information, explain regulations, and offer support to investors when requested.

The semiannual Vietnam Business Forum allows for a direct dialogue between the foreign business community and government officials. The U.S.-ASEAN Business Council (USABC) also hosts an annual visit for its members to engage directly with senior government officials. The government maintains frequent dialogue with foreign investors, and meets with U.S. companies to try to resolve issues.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own businesses in Vietnam, except in six prohibited areas (illicit drugs, wildlife trading, prostitution, human trafficking, human cloning, and chemical trading). If a company wants to operate in 243 provisional sectors, it must satisfy conditions in accordance with the Investment Law. Foreign investors must negotiate on a case-by-case basis for market access in sectors that are not explicitly open. The government occasionally issues investment licenses on a pilot basis with time limits, or to specifically targeted investors.

Vietnam allows foreign investors to acquire full ownership of local companies, except when mentioned otherwise in international and bilateral commitments, including equity caps, mandatory domestic joint-venture partner, and investment prohibitions. For example, as specified in the Vietnam’s World Trade Organization (WTO) commitments, highly specialized and sensitive sectors (such as banking, telecommunication, and transportation) still maintain FOL, but the Prime Minister can waive these restrictions on a case-by-case basis. Vietnam also limits foreign ownership of state-owned enterprises (SOEs) and prohibits importation of old equipment and technologies more than 10 years old. No mechanisms disadvantage or single out U.S. investors.

Merger and acquisition (M&A) activities can be tricky if the target domestic company is operating in a restricted or prohibited sector. For example, when a foreign investor buys into a local company through an M&A transaction, it is difficult to determine which business lines the acquiring foreign company is allowed to maintain and, in many cases, the targeted company may be forced to reduce its business lines.

Vietnamese authorities evaluate investment-license applications using a number of criteria, including: 1) the investor’s legal status and financial capabilities; 2) the project’s compatibility with the government’s “Master Plan” for economic and social development and projected revenue; 3) technology and expertise; 4) environmental protection; 5) plans for land-use and land-clearance compensation; 6) project incentives including tax rates, and 7) land, water, and sea surface rental fees. The decentralization of licensing authority to provincial authorities has, in some cases, streamlined the licensing process and reduced processing times. However, it has also caused considerable regional differences in procedures and interpretations of investment laws and regulations. Insufficient guidelines and unclear regulations can prompt local authorities to consult national authorities, resulting in additional delays. Furthermore, the approval process is often much longer than the timeframe mandated by law. Many U.S. firms have successfully navigated the investment process, though a lack of transparency in the procedure for obtaining a business license can make investing riskier.

Provincial People’s Committees approve all investment projects, except the following:

  • The National Assembly must approve investment projects that:
    • have a significant environmental impact;
    • change land usage in national parks;
    • are located in protective forests larger than 50 hectares; or
    • require relocating 20,000 people or more in remote areas such as mountainous regions.
  • The Prime Minister must approve investment project proposals:
    • to build airports, seaports, or casinos; to explore, produce and process oil and gas; or to produce tobacco;
    • with an investment capital of more than VND 5,000 billion (USD 233 million);
    • with foreign investors in sea transportation, telecommunication or network infrastructure, forest plantation, publishing, or press; and
    • involving fully foreign-owned scientific and technology companies or organizations.

Other Investment Policy Reviews

No third-party international investment policy reviews were conducted in the last three years. Vietnam went through an OECD investment policy review in 2009. The WTO reviewed Vietnam’s trade policy in 2013 and the report is online. ( ). U.N. Conference on Trade and Development’s (UNCTAD) conducted an investment policy review in 2008.

Business Facilitation

Vietnam’s business environment continues to improve due to new laws that have streamlined the business registration processes. The 2016 PCI report found that 91 percent of companies are able to operate their business three months after starting the process. Specifically, the study found, as a result of the 2014 Investment Law and 2015 Implementing Decree 78 that reduced the timeline for receiving the Enterprise Registration Certificate, the entry requirements for foreign investors are no longer perceived to be a significant hurdle. Vietnam’s legal system considers any company with over 51 percent local ownership to be domestically invested, making it eligible for a more simplified licensing process.

Vietnam’s nationwide business registration site is In addition, as a member of the UNCTAD international network of transparent investment procedures, information on Vietnam’s investment regulations can be found online ( The website provides information for foreign and national investors on administrative procedures applicable to investment and income generating operations, including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal and regulatory citations for seven major provinces. The 2018 World Bank’s Doing Business Report stated it took on average 22 days to start a business. Vietnam is one of the few countries to receive a 10-star rating from UNCTAD in business registration procedures.

There are no mechanisms ensuring equitable treatment for women-owned businesses. The government provides business facilitation measures to ethnic minorities through various national supporting programs.

Outward Investment

The government does not have a clear mechanism to promote or incentivize outward investments. The majority of companies engaged in overseas investments are large SOEs, which have strong government-backed financial resources. The government does not implicitly restrict domestic investors from investing abroad. Vietnamese companies have made increased investments in the oil, gas, and telecommunication sectors in various developing countries.

2. Bilateral Investment Agreements and Taxation Treaties

Vietnam maintains trade relations with 200 countries, and has 65 bilateral investment treaties (BITs) and 26 treaties with investment provisions. It is a party to five free trade agreements (FTAs) with ASEAN, Chile, the Eurasian Customs Union, Japan, and South Korea. As a member of ASEAN, Vietnam also is party to ASEAN FTAs with Australia, New Zealand, China, India, Japan, South Korea, and Hong Kong. Vietnam finalized an FTA with the European Union in 2015, but the agreement has neither been signed nor ratified. In addition, Vietnam is a member of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), which was signed on March 8, 2018. Vietnam is a participant in the Regional Comprehensive Economic Partnership (RCEP) negotiations, which include the 10 ASEAN countries and Australia, China, India, Japan, South Korea, and New Zealand, and it is negotiating FTAs with other countries, including Israel. A full list of signed agreements to which Vietnam is a party is on the UNCTAD website:

Vietnam has signed double taxation avoidance agreements with 77 countries, listed at The United States and Vietnam concluded and signed a Double Taxation Avoidance Agreement (DTA) in 2016, but the agreement is still awaiting ratification by the U.S. Congress.

There are no systematic tax disputes between the government and foreign investors. However, an increasing number of U.S. companies disputed tax audits resulting in retroactive tax assessments. These cases may stem from Vietnam’s chronic budget deficits and the need to find sources to fill the revenue gap left from falling tariffs and falling oil revenues. These retroactive tax cases against U.S. companies can obscure the true risks of operating in Vietnam and give some U.S. investors pause when deciding whether to expand operations.

In February 2017, the government released Decree 20/2017/ND-CP, effective since May 2017, which introduced many new transfer-pricing reporting and documentation requirements, as well as new guidance on the tax deductibility of service and interest expenses.

3. Legal Regime

Transparency of the Regulatory System

AmCham’s March 2017 report noted that its members face significant challenges with inconsistent regulatory interpretation, irregular enforcement, and unclear laws. The report also noted that a survey of AmCham members in the ASEAN region found that, more than in any other ASEAN country, American companies perceive a lack of fair law enforcement in Vietnam, which heavily affects their ability to do business in the country. The 2017 PCI report found that access to land and security of business premises were the primary concern for foreign companies investing in Vietnam. However, the report also found improvements in the area of post-entry regulations (regulations businesses face after they start operations), and the burden of administrative procedures was declining. In addition, according to that report, corruption has become less prevalent in certain areas for FIEs.

In Vietnam, the National Assembly passes laws, which serve as the highest form of legal direction, but which often lack specifics. The central government, with the Prime Minister’s approval, issues decrees, which provide guidance on a law’s implementation. Individual ministries issue circulars, which provide guidance as to how that ministry will administer a law or a decree. Ministries draft laws and circulate for review among related ministries. Once the law is cleared through the various ministries, the government will post the law for a 60-day comment period. During the comment period or ministry review, if there are major issues with the law, the law will go back to the ministry that drafted the law for further revisions. Once the law is ready, it is submitted to the Office of Government (OOG) for approval, and then submitted to the National Assembly for a series of committee and plenary-level reviews. During this review, the National Assembly can send the law back to the drafting ministry for further changes. Laws are also submitted to the Communist Party’s Politburo for review via a separate process.

Drafting agencies often lack the resources needed to conduct adequate scientific or data-driven assessments. In principle, before being issued, regulations go through an impact assessment. The quality of these assessments varies, however.

Regulatory authority exists in both the central and provincial government, and foreign companies are bound by both central and provincial government regulations. Vietnam has its own accounting standards to which publicly listed companies are required to adhere.

The Ministry of Justice (MOJ) is in charge of ensuring that government ministries and agencies follow administrative processes. The Ministry has a Regulatory Management Department, which oversees and reviews legal documents after they are issued to ensure compliance with the legal system. The Law on the Promulgation of Legal Normative Documents requires all legal documents and agreements to be published online for comments for 60 days, and published in the Official Gazette before implementation. Business associations and various chambers of commerce regularly comment on draft laws and regulations. However, when issuing more detailed implementing guidelines, government entities sometimes issue circulars with little advance warning and without public notification, resulting in little opportunity for comment by affected parties. In several cases, authorities receive comments for the first draft only and make subsequent draft versions unavailable to the public. The centralized location where key regulatory actions are published can be found at

While Vietnam’s legal framework might comply with international norms in some areas, the biggest issue continues to be enforcement. For example, while anti-money laundering statues comply with international standards, there has yet to be a prosecution. Therefore, while all state agencies participate in reviewing the regulatory enforcement under their legal mandates, regulatory review and enforcement mechanisms continue to be weak.

International Regulatory Considerations

Vietnam is a member of ASEAN, a 10-member regional organization working to advance economic integration through cooperation in economic, social, cultural, technical, scientific and administrative fields. Within ASEAN, the ASEAN Economic Community (AEC) has the goal of establishing a single market across ASEAN nations (similar to the EU), but that goal appears far off. To date, the greatest success of the AEC has been tariff reductions. As a result, more than 97 percent of intra-ASEAN trade is tariff-free, and less than 5 percent is subject to tariffs above 10 percent.

Vietnam is a party to of WTO’s Trade Facilitation Agreement (TFA) and has been implementing the TFA’s Category A provisions. However, Vietnam missed the February 23, 2018, TFA deadline to submit its Category B and Category C implementation timelines to the WTO due to the government’s slow bureaucratic process.

Legal System and Judicial Independence

The legal system is a mix of customary, French, and Soviet civil legal traditions. Vietnam generally follows an operational understanding of the rule of law that is consistent with its top-down, one-party political structure and traditionally inquisitorial judicial system. Contracts are regulated by various laws and regulations, with each type of contract subject to specific regulations.

If a contract does not contain a dispute-resolution clause, courts will have jurisdiction over a possible dispute. Vietnamese law allows dispute-resolution clauses in commercial contracts explicitly through the Law on Commercial Arbitration. The law follows the United Nations Commission on International Trade Law (UNCITRAL) model law as an international standard for procedural rules, and the lawmakers’ intention is indeed arbitration-friendly.

Under the revised 2015 Civil Code, all contracts are “civil contracts” subject to uniform rules. In foreign civil contracts, parties may choose foreign laws as a reference for their agreement, if the application of the law does not violate the basic principles of Vietnamese law. When the parties to a contract are unable to agree on an arbitration award, the dispute can be brought to court.

The 2005 Commercial Law regulates commercial contracts between businesses. Specific regulations provide specific forms of contracts, depending on the nature of the deals. The hierarchy of the country’s courts is: (1) the Supreme People’s Court; (2) the High People’s Court; (3) Provincial People’s Courts; and (4) District People’s Courts. The People’s Courts operate in five divisions: criminal, civil, administrative, economic, and labor. The People’s Procuracy is responsible for prosecuting criminal activities as well as supervising judicial activities.

Vietnamese courts will only consider recognition of civil judgments issued by courts in countries that have entered into agreements on recognition of judgments with Vietnam or on a reciprocal basis. However, with the exception of France, these treaties only cover non-commercial judgments.

Vietnam lacks an independent judiciary, and there is a lack of separation of powers among Vietnam’s branches of government. For example, Vietnam’s Chief Justice is also a member of the Communist Party’s Central Committee. According to Transparency International, the risk of corruption in judicial rulings is significant, as nearly one-fifth of surveyed Vietnamese households that have been to court declared that they had paid bribes at least once. Many businesses therefore avoid Vietnamese courts.

Along with corruption, the judicial system continues to face additional problems. For example, many judges and arbitrators lack adequate legal training and are appointed through personal or political contacts with party leaders or based on their political views. In addition, extremely low judicial salaries engender corruption.

Regulations or enforcement actions are appealable, and appeals are adjudicated in the national court system. Through a separate legal mechanism, individuals and companies can file complaints against enforcement actions under the Law on Complaints.

Laws and Regulations on Foreign Direct Investment

The 2014 Investment Law aimed to improve the investment environment. Previously, Vietnam used a “positive list” approach, meaning that foreign businesses were only allowed to operate in a list of specific sectors outlined by law. Starting in July 2015, Vietnam implemented a “negative list” approach, meaning that foreign businesses are allowed to operate in all areas except for six prohibited sectors or business lines. In November 2016, the National Assembly amended the Investment Law to reduce the list of 267 provisional business lines down to 243.

The law also requires foreign and domestic investors to be treated the same in cases of nationalization and confiscation. However, foreign investors are subject to different business-licensing processes and restrictions, and Vietnamese companies that have a majority foreign investment are subject to foreign-investor business-license procedures. Since June 2017, foreign investors can choose to apply for ERC and Investment Registration Certificate separately or through a “one-stop-shop” process, which saves time and cost. Investment procedures for the seven major provinces of Binh Dinh, Danang, Hai Phuong, Hanoi, Ho Chi Minh City (HCMC), Phu Yen, and Vinh Phuc can be found at

Competition and Anti-Trust Laws

The Vietnam Competition Administration (VCA) of MOIT reviews transactions subject to complaints for competition-related concerns. In 2016, VCA received 18 complaints on unfair competition, but did not investigate any cases. Instead, it focused its attention on violations in multi-level sale activities, sanctioning 41 enterprises and revoking 15 multi-level sales certificates.

The Government of Vietnam is currently revising the 2004 Law on Competition, which it expects to adopt in 2018. The new draft substantially expands the criteria by which firms will be judged as exercising market power. In addition to the traditional criterion of market shares, the law will also consider other factors such as firm size, ability to erect barriers to entry, and the ability to control consumer markets, distribution channels, or input supplies. An important feature of the new law is that it will introduce leniency to firms and individuals that are first to report on market-power abuse, which is a best international practice and found to be highly effective in the United States and Europe. In addition, this law will ensure that SOEs in Vietnam comply with its international trade treaties.

Expropriation and Compensation

Under Vietnamese law, the government can only expropriate investors’ property in cases of emergency, disaster, defense, or national interest, and the government is required to compensate investors if it expropriates property. Under the U.S.-Vietnam Bilateral Trade Agreement, Vietnam must apply international standards of treatment in any case of expropriation or nationalization of U.S. investor assets, which includes acting in a non-discriminatory manner with due process of law and with prompt, adequate and effective compensation.

Dispute Settlement

ICSID Convention and New York Convention

Vietnam has not yet acceded to the International Center for Settlement of Investment Disputes (ICSID) Convention. MPI has submitted a proposal to the government to join the ICSID, but this is still under consideration.

Vietnam is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning that foreign arbitral awards rendered by a recognized international arbitration institution should be respected by Vietnamese courts without a review of cases’ merits. Only a limited number of foreign awards have been submitted to the MOJ and local courts for enforcement so far, and almost none have successfully made it through the appeals process to full enforcement. As a signatory to the New York Convention, Vietnam is required to recognize and enforce foreign arbitral awards within its jurisdiction, with very few exceptions. However, in practice, this is not always the case.

Investor-State Dispute Settlement

The government is not a signatory to a treaty or investment agreement in which binding international arbitration of investment disputes is recognized, and has yet to sign a BIT or FTA with the United States. Although the law states that the court should recognize and enforce foreign arbitral awards, Vietnamese courts may reject these judgements if the award is contrary to the basic principles of Vietnamese laws.

International Commercial Arbitration and Foreign Courts

Vietnam’s legal system remains underdeveloped and is often ineffective in settling commercial disputes. Negotiation between concerned parties is the most common means of dispute resolution. Since the Law on Arbitration does not allow a foreign investor to refer an investment dispute to a court in a foreign jurisdiction, Vietnamese judges cannot apply foreign laws to a case before them, and foreign lawyers cannot represent plaintiffs in a court of law.

In February 2017, the government issued Decree No. 22/2017/ND-CP (Decree 22) on commercial mediation, which came into effect in April 2017. Decree 22 spells out in detail the principle procedures for commercial mediation. More information on Decree 22 can be found at

The Law on Commercial Arbitration took effect in 2011. Currently there are no foreign arbitration centers in Vietnam, although the Arbitration Law permits foreign arbitration centers to establish branches or representative offices. Foreign and domestic arbitral awards are legally enforceable in Vietnam; however, in practice it can be very difficult.

As a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Vietnam is required to recognize and enforce foreign arbitral awards within its jurisdiction, with very few exceptions.

There are no readily available statistics on how often domestic courts rule in favor of SOEs. In general, the court system in Vietnam works slowly. International arbitration awards, when enforced, may take years from original judgment to payment. According to the 2016 PCI report, 19 percent of businesses chose to avoid the Vietnamese court system during disputes in 2016 due to concerns related to potential bribery during the process.

Bankruptcy Regulations

In 2014, Vietnam revised its Bankruptcy Law to make it easier for companies to declare bankruptcy. The new law clarifies the definition of insolvency as an enterprise that is more than three months overdue in meeting its payment obligations. The new law also provided provisions allowing creditors to commence bankruptcy proceedings against an enterprise, and created procedures for credit institutions to file for bankruptcy. Despite these changes, according to the World Bank’s 2018 Ease of Doing Business Report, it still takes on average five years to conclude a bankruptcy case in Vietnam, and the recovery rate on average is only 22 percent.

The Credit Information Center of the State Bank of Vietnam provides credit information services.

4. Industrial Policies

Investment Incentives

Foreign investors are exempt from import duties on goods imported for their own use that cannot be procured locally, including machinery, vehicles, components and spare parts for machinery and equipment, raw materials, inputs for manufacturing, and construction materials. Remote and mountainous provinces are allowed to provide additional tax breaks and other incentives to prospective investors.

In addition, projects in the following areas are entitled to investment incentives such as lower corporate income tax, exemption of import tariffs, or land rental: high-tech; research and development; new materials; energy; clean energy; renewable energy; energy saving products; automobiles; software; waste treatment and management; primary or vocational education; or projects located in remote areas or industrial zones.

Vietnam promotes foreign investment in certain priority sectors, and in geographic regions that are remote or underdeveloped. The government encourages investment in the production of new materials, new energy sources, metallurgy and chemical industries, manufacturing of high-tech products, biotechnology, information technology, mechanical engineering, agricultural, fishery and forestry production, salt production, generation of new plant varieties and animal species, ecology and environmental protection, research and development, knowledge-based services, processing and manufacturing, labor-intensive projects (using 5,000 or more full-time laborers), infrastructure projects, education, training, and health and sports development.

Foreign Trade Zones/Free Ports/Trade Facilitation

In recent years, Vietnam has prioritized efforts to establish free trade zones (FTZs). Vietnam currently has approximately 300 industrial zones (IZs) and export processing zones (EPZs). Many foreign investors report that it is easier to implement projects in industrial zones because they do not have to be involved in site clearance and infrastructure construction. Enterprises pay no duties when importing raw materials if they export the finished products. Customs warehouse keepers in FTZs can provide transportation services and act as distributors for the goods deposited. Additional services relating to customs declaration, appraisal, insurance, reprocessing, or packaging, require the approval of the provincial customs office. In practice, the time involved for clearance and delivery can be lengthy and unpredictable.

Performance and Data Localization Requirements

Vietnam does not mandate that businesses hire local workers, including for senior management roles or on the board of directors. However, companies must prove their efforts to hire suitable local employees were unsuccessful before recruiting foreigners. This does not apply to board members elected by shareholders or capital contributors. In February 2016, the government issued Decree No.11/2016/ND-CP, guiding a number of articles of the Labor Code on foreigners working in Vietnam, which entered into force in April 2016. Decree 11 included positive changes, including changes to the conditions, paperwork, and timeline for work permit applications and exemptions, and clarification that the work-permit and exemption-certificate requirements did not apply to foreigners coming to work for less than 30 days with less than 90 days of cumulative working time in one year.

The government does not have a forced localization policy per se, but has been increasingly adopting policies to encourage or require foreign investors to use domestic content in goods and technology. For example, Circular 14/2015/TT-BKHDT applied high tariffs to imported automotive parts to protect domestic production and encourage foreign auto manufacturers to source component parts locally. Another example is Draft Decree 54/2017/ND–CP, proposed in July 2017, which stipulates FIEs can import drugs into Vietnam, but are not permitted to transport, store, or distribute drugs.

There are currently no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside of Vietnam. The most important regulation is Decree 72/2013/ND-CP, on the management, provision and use of Internet services and online information. While Decree 72 technically requires organizations establishing “general websites,” or social networks and companies providing online gaming services or services across mobile networks to maintain at least one server in Vietnam, in practice the regulation is only applied to domestic firms, and the only sporadically. It also establishes requirements for storing certain types of data (personally identifiable information of users, user activity logs, etc.), but it is unclear if that information must be stored on a local server. In 2016, the Ministry of Information and Communications (MIC) issued Circular 38/2016/TT-BTTT, one of the implementing circulars of Decree 72. The circular does not require localization of servers, though it does require offshore service providers with a large number of users in Vietnam to comply with local content restrictions. Specific requirements under Circular 38 apply to offshore entities that provide cross-border public information into Vietnam (including websites, social networks, online applications, search engines and other similar forms of services) and that (a) have more than one million hits from Vietnam per month or (b) lease a data center to store digital information in Vietnam in order to provide its services.

However, the government is exploring draft legislation to require data localization for cross-border services. In 2017, the Ministry of Public Security (MPS) released a draft law on cybersecurity that would require Vietnamese users’ data to be stored in Vietnam and would require all cross-border service providers to host servers within Vietnamese territory. The National Assembly is expected to vote on the law in May or June 2018. The Ministry of Finance (MOF) is also proposing draft legislation in 2019 to request cross-border service providers via Internet protocol to have a representative office in Vietnam, citing the necessity of local office requirements for taxation purposes.

There are no requirements that foreign IT providers have to turn over source code and/or provide access to encryption. Vietnam has no international commitments in this area and does not permit cross-border online gaming. Therefore, gaming providers tend to establish a joint venture with a Vietnamese company and locate one server in Vietnam. Regarding financial data localization, Circular 31 requires backup information, but does not impede cross-border data flows.

The MIC is the lead agency for administrative enforcement of cyber-related regulations, including data-storage requirements, though the 2017 draft law on cybersecurity would cede that role to MPS. MPS’s cyber division may now also get involved if there is a suspected criminal violation of data-storage rules.

When Vietnam joined the WTO in 2007, it established minimum commitments on market access for U.S. goods and services, as well as equal treatment for Vietnamese and foreign companies. Vietnam undertook commitments on goods (tariffs, quotas, and ceilings on agricultural subsidies) and services (provisions of access to foreign-service providers and related conditions). It has also committed to implementing agreements on intellectual property (the Trade-Related Aspects of Intellectual Property Rights Agreement), customs valuation, technical barriers to trade, sanitary and phytosanitary measures, import licensing provisions, anti-dumping and countervailing measures, and rules of origin. As part of its WTO accession, Vietnam also committed to remove performance requirements that are inconsistent with the agreement on Trade-Related Investment Measures (TRIMs). The 2014 Investment Law specifically prohibits the following: giving priority to domestic goods or services; compulsory purchases from a specific domestic firm; export of goods or services at a fixed percentage; restricting the quantity, value, or type of goods or services exported or sourced domestically; fixing import goods at the same quantity and value as goods exported; requirements to achieve certain local content ratios in manufacturing goods; stipulated levels or values on research and development activities; supplying goods or services in a particular location; and mandating the establishment of head offices in a particular location.

The government updates, on an ad hoc basis, the list of investment priority high-tech products and companies investing in research and development for items that are entitled to the highest tax incentives and may be eligible for funding from the National High-Tech Development Program. Companies that develop infrastructure for high-tech parks will also receive land incentives.

5. Protection of Property Rights

Real Property

The State collectively owns and manages all land in Vietnam, and therefore neither foreigners nor Vietnamese nationals can own land. However, the government grants land-use and building rights, which can be held privately. According to the Ministry of National Resources and Environment (MONRE), as of November 2017, the government has issued land-use rights certificates for 96.3 percent of land in Vietnam. If land is not used, according to the land-use rights certificate or if it is unoccupied, it reverts to the government. Vietnam is building a national land registration database, and some localities have already digitized their land records.

State protection of property rights is still evolving, as the state can expropriate land for socio-economic development. Under the Housing Law and Real Estate Business Law passed by the National Assembly in November 2014, land can only be taken if it is deemed necessary for social-economic development in the public or national interest, and is approved by the Prime Minister or the National Assembly, as well as the Provincial People’s Council. However, “socio-economic” development is loosely defined, and there are many outstanding legal disputes between landowners and local authorities. Disputes over land rights continue to be a significant driver of social protest in Vietnam. Foreign investors also may be exposed to land disputes through M&A activities when they buy into a local company.

In addition to land, the state’s collective property includes “forests, rivers and lakes, water supplies, wealth lying underground or coming from the sea, the continental shelf and the air, the funds and property invested by the government in enterprises, and works in all branches and fields – the economy, culture, society, science, technology, external relations, national defense, security – and all other property determined by law as belonging to the State.”

The Housing Law and Real Estate Business Law extended “land-use rights” to foreign investors, allowing titleholders to conduct property transactions, including mortgages. Foreign investors can lease land for renewable periods of 50 years, and up to 70 years in some poor areas of the country.

Some investors have encountered difficulties amending investment licenses to expand operations onto land adjoining existing facilities. Investors also note that local authorities may intend to increase requirements for land-use rights when current rights must be renewed, particularly in instances when the investment in question competes with Vietnamese companies.

Intellectual Property Rights

The legal basis for intellectual property rights (IPR) includes the 2005 Civil Code, the 2005 Intellectual Property Law as amended in 2009, the 2015 Penal Code, and implementing regulations and decrees. Vietnam has joined the Paris Convention on Industrial Property and the Berne Convention on Copyright and has worked to meet its commitments under these international treaties. On January 1, 2018, the 2015 Penal Code entered into force with clearer guidelines on the application of criminal penalties for certain acts of IPR infringement or piracy. However, enforcement agencies still lack clarity and experience in how to impose criminal penalties on IPR violators and continue to wait for further implementing guidelines.

Circular No. 16/2016/TT-BKHCN, which amends and supplements a number of articles of Circular No. 01/2007/TT-BKHCN, one of the core regulations in the Vietnam IP system, came into force on January 15, 2018. IP attorneys expect the circular will have a significant, positive impact on patent and trademark examination procedures, but also expect further revisions in 2019 and in the IP Law revision. With technical support from the World Intellectual Property Organization (WIPO), Vietnam in 2017 also completed a National Strategy for Intellectual Property to create a roadmap for promoting innovation and a more effective IP framework by 2030.

Although Vietnam has made progress in establishing a legal framework for IPR protection, significant problems remain and new challenges are emerging. The country remains on the Special 301 Watch List. In 2017, Vietnam had mixed results in its efforts to protect IPR. Vietnam’s continued integration into the global economic community, as well as increasing domestic pressure for IP protections, may be harbingers of positive change. Nevertheless, infringement and piracy remained commonplace, and the impact of digital piracy and the increasing prevalence of counterfeit goods sold online continued to undermine the IPR environment. The increasingly sophisticated capabilities of domestic counterfeiters, coupled with developing smuggling routes through Vietnam’s porous borders, were also worrisome trends. There are ten ministries sharing some level of responsibility for IPR enforcement and protection, which often leads to duplication or confusion. Additionally, the roles and power of these ministries and agencies varies widely.

In 2017, the National Office of Intellectual Property (NOIP) reported receiving 80,599 IP applications of all types, of which 39,250 were registered for industrial property rights (up 1 percent compared to 2016). NOIP reported granting 1,745 patents in 2017 (up 22.6 percent) from 2016. Industrial designs registrations reached 2,267 in 2017 (up 56 percent from 2016). In total, more than 28,310 protection titles for industrial property were granted out of more than 58,870 applications in 2017 (up 9.4 percent from 2016). The General Department of Customs caught 32 cases of infringement with fines for infringers totaling USD 19,470 in 2017. Most cases involved interception of goods in transit through Vietnam to Laos, Cambodia, and Thailand.

The Copyright Office of Vietnam (COV) received 27 copyright petitions, settled 26 cases, and received 10 requests for copyright assessment in 2017. COV also reported it issued 6,294 copyright certificates in 2017, a small decline compared to 2016. In 2017, the Ministry of Culture, Sports, and Tourism Inspectorate (MCSTI) carried out inspections for software licensing compliance on 63 companies, a decline from 2016. Authorities discovered 54 violations that resulted in fines of USD 68,700, a 31 percent decrease in fines from 2016. The inspectors also carried out five inspections of individuals and companies selling art and photography that resulted in one infringement finding and a fine of USD 88. In September 2017, the MIC-affiliated Authority of Broadcasting and Electronic Information (ABEI) published a list of 83 websites found to infringe on copyrighted information.

For more information, please see the following reports from the U.S. Trade Representative:

Special 301 Report:

Notorious Markets Report: percent20Notorious percent20Markets percent20List percent201.11.18.pdf

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at

6. Financial Sector

Capital Markets and Portfolio Investment

Although Vietnam welcomes foreign portfolio investment, Morgan Stanley Capital International (MSCI) still classifies Vietnam as a Frontier Market, which precludes some of the world’s biggest asset managers from investing in its stock markets. Vietnam is working to meet the criteria necessary to attain “emerging market” status and attract greater foreign capital inflows.

While the government has acknowledged the need to strengthen both the capital and debt markets, there has been no substantial progress, leaving the banking sector as the primary capital source for Vietnamese companies. Challenges to raising capital domestically include insufficient transparency in Vietnam’s financial markets and non-compliance with internationally accepted accounting standards.

Vietnam has two stock exchanges, which are the HCMC Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX). The State Securities Commission (SSC) regulates both. As of February 2018, HOSE and HNX had total market capitalization of approximately USD 220 billion, surpassing 110 percent of Vietnam’s GDP. Government bonds account for one fifth of the total market capitalization traded on the HNX. A trading floor for unlisted public companies (UPCOM) operates at the Hanoi Securities Center, where many equitized SOEs first list their shares (due to lower transparency requirements) before moving to HOSE or HNX. Roughly 90 percent of the combined market capitalization is in HOSE.

Vietnam complies with International Monetary Fund (IMF) Article VIII. The government notified the IMF that it accepted the obligations of Article VIII, Sections 2, 3, and 4, effective November 8, 2005.

Banks charge relatively high interest rates for new loans because they must continue to service existing non-performing loans (NPLs). Domestic companies, especially small and medium enterprises (SMEs), often have difficulty accessing credit. Foreign investors are generally able to obtain local financing.

Money and Banking System

The State Bank of Vietnam (SBV) estimates that around 70-80 percent of the total population are underbanked or do not have bank accounts, due to an inherent distrust of the banking sector, the engrained habit of holding assets in cash, foreign currency, and gold, and the limited use of financial technology tools. Since recovering from the 2008 global downturn, Vietnam’s banking sector has been stable. However, despite various banking reforms, Vietnam’s banking sector continues to be concentrated at the top and fragmented at the bottom.

By the end of 2017, state-owned or majority state-owned banks accounted for over 46 percent of total assets, and over 40 percent of equity capital in the banking sector. The estimated total assets in the banking system is USD 454.6 billion. In addition, 31 private joint-stock commercial (private) banks, all smaller than the state-owned banks, are gradually gaining market share. There were also nine foreign-owned banks (HSBC, Standards Chartered, Shinhan, Hong Leong, Woori Bank, Public Bank, CIMB Bank, ANZ and United Overseas Bank), 49 branches of foreign banks, 47 representatives of foreign banks, and two joint-venture banks (Vietnam-Russia Bank and Indovina Bank).

Vietnam has made some progress on reducing its NPLs, but most domestic banks remain under-capitalized with high NPL levels that continue to drag on economic growth. Accurate NPL data is not available and the central bank frequently underreports the level of NPLs. Other issues in the banking sector include state-directed lending by state-owned commercial banks, cross-ownership, related-party lending under non-commercial criteria, and preferential loans to SOEs that crowd out credit to SMEs. By law, banks must maintain a minimum chartered capital of VND 3 trillion (roughly USD 134 million).

Currently, the ceiling for total foreign ownership in a Vietnamese bank remains at 30 percent, with a 5 percent limit for non-strategic individual investors, a 15 percent limit for non-strategic institutional investors, and a 20 percent limit for strategic institutional partners. In early 2017, the Prime Minister promised to increase the limits of foreign ownership in local banks, though he did not specify the new ceiling. Prudential measures and regulations apply the same to domestic and foreign banks.

We are unaware of any lost correspondent-banking relationships in the past three years. However, after the SBV took over three failing banks (Ocean Bank, Construction Bank, and Global Petro Commercial Bank (GP Bank)), and placed Dong A Bank under special supervision in 2015, correspondent-banking relationships with those banks may have been limited.

Vietnam has begun studying blockchain technologies in financial services and SBV established a steering committee on financial technology (fintech) in March 2017.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no restrictions on foreign investors converting and repatriating earnings or investment capital from Vietnam. However, funds associated with any form of investment cannot be freely converted into any world currency.

The SBV has a mechanism to determine the interbank reference exchange rate. In order to provide flexibility in responding to exchange rate volatility, the SBV now announces the interbank reference exchange rate daily. The rate is determined based on the previous day’s average interbank exchange rates, taking into account movements in the currencies of Vietnam’s major trading and investment partners.

Remittance Policies

Vietnam allows foreign businesses to remit profits, capital contributions, and other legal investment activity revenues in hard currency. There are no time constraints on remittances or limitations on outflow remittances of profits or revenue. However, outward foreign currency transactions require certain supporting documents (such as audited financial statements, import/foreign-service procurement contracts and proof of tax obligation fulfillment, and approval of the SBV on loan contracts etc.).

Sovereign Wealth Funds

The State Capital Investment Corporation (SCIC) technically qualifies as a sovereign wealth fund (SWF), as its mandate is to invest dividends and proceeds from privatization in assets outside of the state-owned sector. It was estimated at USD 2.8 billion in June 2016 (an updated estimate is not available.) However, the SCIC does not manage or invest balance-of-payment surpluses, official foreign currency operations, government transfer payments, fiscal surpluses, or surpluses from resource exports. SCIC’s primary mandate is to manage the non-privatized portion of SOEs. By July 2017, the SCIC managed a portfolio of 141 equitized SOEs, including 134 joint-stock companies, and three limited companies in various sectors. The SCIC invests 100 percent of its portfolio in Vietnam, and the SCIC’s investment of dividends and divestment proceeds does not appear to have any ramifications for U.S. investors. The SCIC budget is reasonably transparent, audited, and can be found at In addition, the SCIC is working toward membership in the IMF-hosted International Working Group on SWFs.

7. State-Owned Enterprises

In 2017, Vietnam had 505 wholly SOEs (100 percent state owned) and approximately 2,000 SOEs in which the state owned a majority interest. Vietnam does not publish a full list of SOEs and they operate in nearly every industrial sector. However, in 2016, the government issued Decision 58/2016/QD-TTg (Decision 58) specifying the industries and areas in which the government will have wholly owned and majority-owned enterprises, including electricity distribution, airport management and operation, large-scale mineral mining, production of basic chemicals, and telecommunications services with network infrastructure, among others.

While SOEs have boards of directors, these boards are not independent. Ministries govern centrally owned SOEs, while provincial governments govern local SOEs; both have the right to appoint their staff to the boards. For SOEs in which the government holds the majority stake, the government ministries and provincial governments still have the right to appoint executive staff of the companies. SOE senior officials do not typically retain their government positions, but they still retain links to the government, and may return to government service once they terminate their employment with the SOE.

SOEs do not operate on a level playing field with domestic companies and continue to benefit from preferential access to resources such as land, capital, and political largesse. The 2016 PCI report found 70 percent of foreign firms polled perceived SOEs receive preferential treatment and access to resources – primarily land and capital. Foreign firms alleged that preferential access to resources allowed SOEs to expand into multiple sectors at the expense of foreign firms.

In 2015, the government issued Decree 81/2015/ND-CP to require SOEs to implement strict information disclosure procedures in accordance with listed company requirements. However, because there is no clear punishment for violations, SOEs have little incentive to follow the decree. By the end of 2017, only 42.6 percent SOEs disclosed the required information, according to MPI. Of those, SOEs only disclosed an average of five of the nine required financial reports. Also in 2017, only 55 out of 77 SOEs under provincial and ministerial managements made information public, but even those disclosures were not made on a comprehensive or timely basis. MPI confirmed the quality of reporting was insufficient to assess the SOEs’ transparency. Although there are penalties for insufficient disclosure and non-disclosure, these penalties are not significant enough to improve information disclosure.

According to the World Bank, SOEs would benefit from a “modern corporate governance system that separates state ownership rights from regulatory functions and implements an objective and transparent mechanism for the selection of CEOs and board members.” The government framework for wholly owned SOEs is fragmented, incoherent, and the management of SOEs is not in line with sound corporate governance. To improve corporate governance and SOE efficiency, the government established the ministerial-level agency of Commission for State Ownership Management in January 2018, to oversee all SOEs (both wholly owned and partially privatized), but its function and structure are not yet finalized.

Privatization Program

Vietnam has been working to reform the SOE sector for over 15 years. Because SOE share sales have historically only transferred a nominal interest (2 to 3 percent) to the private sector, the process of privatization (also known as equitization) has been slow. While only 8 percent of state-owned capital has passed to private investors since 1992, 92 percent still remains in the government hands. Inadequate regulations specifying equitization procedures and pressure from vested interests present the biggest obstacles. Decree 58 specified sectors targeted for equitization, including airport management and related services, mineral mining and extraction, financial service and banking, chemical manufacturing, rice wholesale, petro and oil importation, telecommunications, rubber and coffee processors, and electricity distribution.

The slow pace of SOE reform may change as the government appears more committed to privatization due to budget pressures and the necessity of growing the private sector for continued economic growth. In 2016, the government received an estimated USD 800 million in equitization proceeds and applied some funds to reduce the budget deficit. In July 2016, the government wholly divested out of 10 large SOEs, including Vinamilk, the most heavily invested stock in frontier market funds, and Sabeco, which controls 47.5 percent of the beverage market. In August 2017, the government released decision 1232/2017/QD-TTg, which listed 406 SOEs it would divest during the 2017-2020 period, along with specific target divestment percentages. The total target value of these divestments is VND65.000 billion (approximately USD 2.86 million), but not all SOEs will be attractive to investors. It appears the government plans to sell the best, most efficient SOEs first to quickly raise cash, but has been slow to address inefficiencies in the rest.

Foreign investors can invest in SOEs. SOE share bidding process information can be found at,, and SOE financial information is available on Th%C3%B4ngtindoanhnghi%E1%BB%87p.aspx

8. Responsible Business Conduct

The government has issued regulations intended to protect the public from adverse business practices in relation to labor rights, consumer protection, and environmental protection. However, the enforcement of these laws is weak. The Enterprise Law allows shareholders to take court action against the management of a company and can nullify fully, or partly, a resolution of a shareholder general meeting through a court order or an arbitration decision. Companies are required to publish their corporate social responsibility activities, corporate governance work, information of related parties and transactions, and compensation of the management. Companies must also announce extraordinary circumstances, such as changes to management, dissolution, or establishment of subsidiaries, within 36 hours of the event.

Most multinational companies implement Corporate Social Responsibility (CSR) programs that contribute to improving the business environment, and awareness of CSR programs is increasing among large domestic companies. The Vietnam Chamber of Commerce and Industry (VCCI) conducts CSR training and highlights corporate engagement on a dedicated website ( in partnership with the UN. In addition, AmCham also has a CSR group that organizes events and activities to raise awareness of social issues.

Overall, the government has not defined responsible business conduct (RBC), nor has it established a national plan or agenda for RBC. The government has yet to establish a national contact point or ombudsman for stakeholders to get information or raise concerns about RBC. In order to improve RBC efforts, the 2016 report by Transparency International found that Vietnam should “develop and ensure the enforcement of regulations requiring companies to do business with ethics and social responsibilities, creating an environment that enables and protects companies doing business with integrity.”

Environmental Protection

The government has issued many legal documents regulating the environment, including the revision of the Environmental Protection Law of 2014, the Constitution of 2013, the Law on Water Resources of 2012, the Law on Fisheries of 2017, as well as hundreds of decrees and circulars that guide the implementation of these laws. However, as with many areas, the practical enforcement of environmental protection laws is inadequate. For example, the Law on Environmental Protection requires that entities, individuals, and households that discharge waste must classify the waste for recycling and reuse. However, violations of this provision are rampant and rarely punished. For example, the 2017 Law on Fisheries stipulates that fishing organizations and individuals must follow set standards when catching fish, specifies significant financial penalties for individuals and organizations engaged in illegal fishing, and prohibits the use of explosives for fishing. However, in practice, violations of these regulations are quite common. At the international level, Vietnamese fishers are coming under increasing criticism for illegal and unreported fishing. In October 2017, the European Union issued Vietnam a “Yellow Card” warning for illegal fishing.

Labor Rights Regulations

Given the significant presence of multinational corporations in the garment-manufacturing sector, there are a several labor-related codes of conduct and other similar initiatives designed to ensure that working conditions and workers’ rights in factories producing clothes for U.S. or European markets meet certain minimal standards. One of the largest programs is Better Work Vietnam, which is implemented by the International Labor Organization (ILO). Better Work monitors garment-producing factories’ compliance with international labor standards and national laws, and the results of factory monitoring visits are made available to major brands and buyers. Better Work also provides technical assistance to factories to help them improve their compliance with international labor standards. In 2017, the program covered 516 factories employing approximately 708,000 workers.

While the Vietnam Confederation of Labor (VGCL) is the only officially recognized trade union, there are a small number of workers’ organizations not affiliated with VGCL that monitor working conditions and advocate for worker rights. VGCL is working with the ILO and other organizations to enhance its capacity to advocate for worker’s rights, and address widespread concerns about its effectiveness. Labor activists and representatives of independent (non-VGCL) workers’ organizations sometimes face government harassment.

Enforcement of labor-rights regulations remains low, and it is unclear how strictly the government enforces provisions for wages, hours, and benefits or occupational safety and health, including in the informal economy. Enforcement has been irregular for many reasons, including low funding and a shortage of trained enforcement personnel. The VGCL has asserted that authorities do not always prosecute violations. The Ministry of Labor, Invalids, and Social Affairs (MOLISA) has acknowledged shortcomings in its labor inspection system and emphasized the number of labor inspectors countrywide is insufficient. Shortcomings include a lack of labor inspectors countrywide, fines that are too low, corruption, and a failure to prosecute.

For a detailed description of regulations on worker/labor rights in Vietnam, see the Department of State’s Human Rights Report (

The Law on Enterprises in theory regulates corporate governance in line with OECD corporate governance principles. However, according to the MPI-affiliated think tank Central Institute of Economic Management (CIEM), “no company in Vietnam applies OECD corporate governance standards.” While that may be harsher than reality, corporate governance in Vietnam ranks lower than Thailand, the Philippines, and Indonesia, according to the most recent ABD report (2015) on ASEAN listed companies.

While corporate governance requirements for listed securities are relatively clear and transparent, enforcement of these rules on the stock exchanges is low. According to the HOSE, 182 out of 344 companies listed did not provide a point of contact to shareholders, 150 companies did not have internal policies to let shareholders approve transactions with related parties as required by law, 50 percent did not provide required information relating to board members or shareholders, and only 44 percent approved board and committee member’s compensation.

The government does not have regulations encouraging companies to adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas, but many multinational companies already comply. In 2016, the Prime Minister called on the MOIT to implement the Extractive Industries Transparency Initiative (EITI) in order to improve the efficiency of the minerals extraction industry. However, to date, Vietnam has not agreed to do so. Vietnam remains only an observer in EITI.

A study by the VCCI released in March 2017 on transparency in the mining sector found issues with inaccurate financial disclosure, unreliable reports on mine reserves throughout the country, and the withholding of information on development and planning, especially at the provincial level. Because of low reported revenues, taxes from the mining sector accounted for just 1 percent of government revenues. Payments made by companies to the government for projects related to the commercial development of oil, natural gas, or minerals are not made public, and only aggregate contributions to the state budget from the oil and gas sector are published. The VCCI study also found that a higher number of mining companies (12 percent) reported having to pay “unofficial fees” than in other industries. Decree 158/2016/ND-CP, that came into effect on January 15, 2017, provides guidelines for implementing the Mineral Law and may improve transparency in the mining sector.

9. Corruption

Transparency International’s 2017 Corruption Perception Index (CPI) determined Vietnam had taken positive steps to improve some areas of its anti-corruption legal framework and policies. However, Vietnam’s rank of 107 out of 176 in the global index reflects the country’s continuing challenges. The CPI narrative section recommends more public-sector reforms, such as government protection for whistleblowers, encouraging NGO participation in investigating anti-corruption, and enforcing an independent judiciary and legislature.

Corruption is due, in large part, to low levels of transparency, accountability, and media freedom, as well as poor remuneration for government officials and inadequate systems for holding officials accountable. Competition among agencies for control over business and investments has created overlapping jurisdictions and bureaucratic procedures that, in turn, create opportunities for corruption.

Vietnam’s 2005 Anti-Corruption Law requires that government officials declare their assets and sets strict penalties for corrupt practices. However, a government official acknowledged in March 2017 that asset declarations by government officials do not include actual income and asset levels, and are not useful in fighting corruption.

The Government has tasked various agencies to deal with corruption, including the Central Steering Committee for Anti-Corruption (chaired by the Communist Party of Vietnam General Secretary Nguyen), the Government Inspectorate, and line ministries and agencies. The Central Steering Committee for Anti-Corruption was formed in 2007, and since February 2013, has been under the CPV Central Commission of Internal Affairs. The National Assembly is also mandated to provide oversight to the operations of government ministries. Civil Society Organizations (CSOs) have encouraged the government to establish a single independent agency that with oversight and enforcement authority, and to ensure enforcement is carried out.

A new Penal Code came into effect in January 2018, which introduced a number of provisions relating to corporate criminal liability and corruption, increased the risks for businesses in the country. While the previous Vietnamese criminal code only provided for criminal liability for individuals, now corporate entities can face criminal sanctions too. The New Penal Code also criminalizes private-sector corruption—something that was absent from Vietnam’s previous anti-corruption regime.

Vietnam signed the UN Anticorruption Convention in December 2003 and ratified it in August 2009. According to the 2017 PCI report, corruption declined, with 59 percent of enterprises reporting paying informal charges (bribes), which accounted for about 10 percent of their revenue. The law does not cover family members of officials, but does cover ranking members of the Communist Party.

The government increased its scrutiny of conflict-of-interest concerns in public procurement since late 2016. For example, in 2017, the National Assembly called the Minister of Industry and Trade for “question and answer” hearings to address whether special interest groups influencing the approval and management of “megaprojects” had adverse economic and environmental impacts.

However, to signal the government is serious about reforming government procurement, the Prime Minister approved, in July 2016, a 10-year master plan for procurement, to develop the national e-Government Procurement Application. This will emphasize and promote online tendering to increase transparency and reduce corruption opportunities. To this end, the government is working to roll out an e-bidding public procurement site in late 2018, which will supplement its existing e-procurement portal.

There are laws prohibiting companies from bribing public officials. While some private companies have internal controls, ethics, and compliance programs to detect and prevent bribery of government officials, the government does not require companies to establish such internal codes of conduct.

For the past two years, the government has embarked on a large anti-corruption initiative. As a result, perceptions of corruption, and the burden of administrative procedures, are both declining. While high-profile arrests have grabbed the focus of the news media, less attention has been paid to institutional changes meant to prevent corrupt activities, including greater transparency and civil-service reforms to encourage accountability. In 2017, there were statistically significant declines in three core indicators of corruption: 1) the share of firms believing informal charges are common; 2) the estimated bribe payments by firms as a share of revenue; and 3) whether commissions are necessary to win government procurement contracts. The 2017 PCI findings are consistent with the annual UN Development Program’s Provincial Administrative Performance Index (PAPI) survey.

Resources to Report Corruption

Contact at government agency responsible for combating corruption:
Mr. Phan Dinh Trac
Chairman, Communist Party Central Committee Internal Affairs
4 Nguyen Canh Chan
+84 0804-3557

Contact at NGO:
Ms. Nguyen Thi Kieu Vien
Executive Director, Towards Transparency
Transparency International National Contact in Vietnam
Floor 4, No 37 Lane 35, Cat Linh street, Dong Da, Hanoi, Vietnam
Phone: +84-24-37153532
Fax: +84-24-37153443

10. Political and Security Environment

Vietnam has a history of protests against perceived social, environmental, and labor injustices. There have been anti-China protests since 2008. In May 2014, Vietnam experienced some of the largest protests in history against China’s movement of Haiyang Shiyou Oil Rig 981 into Vietnam’s territorial waters. Anti-China protests resulted in at least one death and dozens of injuries among the plant’s Chinese workers; protesters separately destroyed and looted multiple foreign-owned factories.

In April 2016, after the Formosa Steel plant discharged toxic pollutants into the ocean and caused a massive fish death, the affected fishermen and residents in central Vietnam began a series of regular protests against the company and the government’s lack of response to the disaster. Protests continued into 2017 in multiple cities until they were largely suppressed by security forces. Many activists who helped organize or document these protests were subsequently arrested and are serving long prison terms, including influential blogger Nguyen Ngoc Nhu Quynh (aka “Mother Mushroom”), labor activist Hoang Duc Binh, and videographer Nguyen Van Hoa. The majority of protests are relatively small and have had little effect on the operations of U.S. companies.

11. Labor Policies and Practices

According to the official government statistics, in 2017, there were 71.5 million people aged 15 and above in Vietnam, with 54.48 million participating in the formal labor force. The labor force is relatively young, with 15-to-39 year olds currently accounting for about half of the total labor force. Despite the strong shift towards urbanization, the majority of workers are still located in rural areas, making up over 67 percent of the total labor force.

The official labor force participation rate in 2017 was over 78 percent of the total population, and the official unemployment and underemployment rates hover round 2 percent. These figures, however, likely under-report rates of unemployment and under-employment by counting people who have multiple, very low-paying informal jobs, along with those with one formal job. The official unemployment rate among youth, defined as those between the ages of 15 and 24 years, was 7.51 percent in 2017.

While literacy rates, enrollment, and graduation rates for primary and secondary education are high — less than 20 percent of the employed population have ever attended college or received vocational training or mid-term professional training — those who complete a post-secondary degree are often unprepared with the types of skills necessary to enter a highly skilled workforce. Many Vietnamese companies report a shortage of workers with adequate skills. While there is a shortage of educated and skilled labor, Vietnam is a labor surplus country overall, with an un- and under-employed labor force that serves as an abundant source of migrant labor regionally as well as globally.

Minimum wage varies geographically. In 2017, the minimum wage for workers in businesses ranges from USD 165 to USD 113 a month. Businesses in urban districts of Hanoi, HCMC, and neighboring areas are subject to a higher minimum wage.

Shortages or Surpluses of Specialized Labor Skills

According to World Economic Forum’s 2017 Global Human Capital Index, Vietnam ranked 64th overall (after Singapore (11), Malaysia (33), and Thailand (40)). Many businesses reported that it was difficult to find skilled labor in Vietnam. The government is aware of the deficiencies in higher education and vocational training, and admits the need for reform in order to increase skillsets. To this end, the Law on Vocational Education took effect in 2015, and stressed the importance of vocational training in human resource development, as well as the government’s strategy for vocation education through 2020. In addition, the national employment fund, managed by the MOLISA, will sponsor targeted vocational training programs for poor households, youth, members of the military, and entrepreneurs.

Foreign nationals are restricted to employment in high-skilled professions, such as managers, executives, and consultants. In 2017, nearly 84,000 foreigners were working in Vietnam (compared to 12,600 in 2004), and the country was developing policies and methods to collect social insurance, according to media reports. Most were skilled workers with work-permits; work-permits are more relaxed for high-skilled foreign workers, especially those working at multinational corporations, and NGOs.

Layoffs and Unemployment Insurance

An employer is permitted to lay off employees due to technological changes or changes in organizational structure (in cases of a merger, consolidation or cessation of operation of one or several departments), or where the employer faces economic difficulties. If these changes lead to the termination of two or more employees, the employer, in conjunction with the grassroots trade union, is required to form and implement a “labor usage plan.” Companies can terminate two or more employees only after consultation with the grassroots trade union and after a 30-day notice to the provincial labor authority.

The employer must pay a job-loss allowance for a laid-off employee who had regularly worked for the employer for at least 12 full months. The job-loss allowance is equal to one month’s salary for each year of service with the employer. After being laid off, workers will be covered under the unemployment scheme if they contributed to the unemployment fund for at least 12 months.

There are no waivers made to labor requirements to attract foreign investment.

Collective Bargaining

Chapter 5 of the Labor Code provides conditions for collective bargaining. Although collective bargaining is not a new concept in Vietnam, the quality of collective bargaining agreements (CBA) is limited. In 2017, Vietnam had approximately 27,866 CBAs accounting for 68 percent of unionized enterprises. While CBAs have been weakly enforced, VGCL in recent years has partnered with the ILO to pilot multi-employer CBAs in some industrial zones and sectoral CBAs in the textile sector.

In June 2016, the Hai Phong Economic Zone Trade Union and five Korean manufacturing enterprises based in Trang Due Economic Zone signed the country’s first multi-enterprise collective bargaining agreement between a group of foreign-invested enterprises and trade unions to set basic conditions of work, including recognition of union rights. The agreement likely benefits nearly 2,500 workers through improved recruitment and female worker policies, increased base wages, better bonuses, allowances, leave, and rest time as well as conditions for ensuring trade union operations in the affected enterprises.

Labor Dispute Resolution Mechanisms

The 2012 revised Labor Code introduced a process of mediation and arbitration for labor disputes. The law allows trade unions and employer organizations to facilitate and support collective bargaining, and requires companies to establish a mechanism to enable management, and the workforce to exchange information, and to consult on subjects that affect working conditions. Regulations require conducting workplace dialogues every three months.

The Labor Code stipulates that trade unions have the right and responsibility to organize and lead strikes, and establishes certain substantive and procedural restrictions on strikes. Strikes that do not arise from a collective labor dispute, or do not adhere to the process outlined by law, are illegal. The law makes a distinction between “interest-based” (“a dispute arising out of the request of the workers’ collective on the establishment of a new working condition,… in the negotiation process between the workers’ collective and the employers”) and “rights-based” (“a dispute between the workers’ collective with the employer arising out of different interpretation and implementation of provisions of labor laws, collective bargaining agreements, internal working regulations, other lawful regulations and agreements”) disputes. In contravention of international standards, the law forbids strikes over “rights-based” disputes. This includes strikes arising out of economic and social policy measures that are not a part of a collective negotiation process, as they are both outside the law’s definition of protected “interest-based” strikes.

The Labor Code prescribes an extensive and cumbersome process of mediation and arbitration before a lawful strike over an interest-based collective dispute can occur. Before workers may hold a strike, they must submit their claims through a process involving a conciliation council (or a district-level labor conciliator where no union is present). If the two parties do not reach a resolution, unions must submit claims to a provincial arbitration council. Unions (or workers’ representatives where no union is present) have the right either to appeal decisions of provincial arbitration councils to provincial people’s courts, or to strike. Individual workers may take cases directly to the people’s court system, but in most cases they may do so only after conciliation has been attempted and failed.

Strikes in Vietnam

The VGCL reported 314 strikes in 2017, almost double the number in 2016. However, all strikes are unofficial (due to the difficulty of conducting a legal strike under Vietnamese labor law), making data reliability questionable. Approximately 60 percent of strikes took place in FIEs and the remaining 40 percent in domestic private companies. The majority of strikes (70 percent) took place in HCMC and surrounding provinces where most FIEs are located, particularly in the garment, footwear, and furniture sectors. The government rarely takes direct action against “illegal” strikers, but has prosecuted independent labor organizers.

Gaps in Compliance in Law or Practice with International Labor Standards

Vietnam has been a member of the ILO since 1992, and has ratified five of the core ILO labor conventions (Conventions 100 and 111 on discrimination, Conventions 138 and 182 on child labor, and Convention 29 on forced labor). Vietnam has not ratified Convention 105 dealing with forced labor as a means of political coercion and discrimination, or Conventions 87 and 98 on freedom of association and collective bargaining, although the government is currently taking steps toward ratification. Under the 1998 Declaration on Fundamental Principles and Rights at Work, however, all ILO members, including Vietnam, have pledged to respect and promote core ILO labor standards, including those regarding association, the right to organize, and collective bargaining.

The constitution affords the right to association, but limits the exercise of these rights, including preventing workers from organizing or joining independent unions of their choice. The law requires every union to be under the legal purview and control of the country’s only trade union confederation, the VGCL. Since the VGCL answers directly to the Community Party’s Vietnam Fatherland Front, no trade unions are protected from government interference or control over union activity.

A 2017 report of the Better Work Vietnam program alleged 37 percent of factories discriminated against or interfered in the activities of the trade union, down from 62 percent in 2015. Similarly, the data revealed that management staff continued to sit on trade-union executive committees in approximately 30 percent of factories, which could undermine the union’s function. At the same time, the report noted only 4 percent of factories reported cases of direct and overt management interference in union activities, and fewer still were found to have prevented workers from meeting without management present.

Vietnam’s legal framework on child labor appears generally in accordance with international standards, however, the Labor Code allows children under age 13 to work in “specific work regulated by the MOLISA.” Since 2012, the U.S. Department of Labor’s List of Goods Produced by Child Labor or Forced Labor has included Vietnamese garments, produced with child labor and forced labor, and bricks, produced with child labor, in violation of international standards. Vietnamese garments are also included in a list of products produced by forced or indentured child labor under Executive Order 13126: Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor. Based on the results of Vietnam’s National Child Labor Survey, in 2016, the U.S. Department of Labor included 14 additional goods produced by child labor in Vietnam to the List of Goods Produced by Child Labor or Forced Labor: cashews, coffee, fish, footwear, furniture, leather, pepper, rice, rubber, sugarcane, tea, textiles, timber, and tobacco.

The government has increasingly acknowledged the issue of child labor in recent years and is a participant in a five-year, USD 8 million dollar project implemented by the ILO, to enhance national capacity to reduce and prevent child labor, which is scheduled to finish in December 2019. The project targets three provinces and three sectors: garments (HCMC); agriculture and fisheries (An Giang); and handicrafts (Hanoi and HCMC).

The government is also in the process of enhancing its policy and regulatory framework for occupational safety and health (OSH). The OSH law, passed in June 2015, extends OSH protections to all workers, including the informal economy, and includes the establishment of an injury compensation system for workers in the informal economy, which constitutes more than 60 percent of the workforce. The ILO is assisting the government with the drafting of implementing regulations for the law and finalizing a national OSH program for 2016-2020.

New Labor Related Laws or Regulations

As Vietnam revises the 2012 Labor Code, significant changes, especially to industrial relations and workers’ organizations, are expected to be included in the revision when National Assembly approves it in 2018.

12. OPIC and Other Investment Insurance Programs

Overseas Private Investment Corporation (OPIC) signed a bilateral agreement with Vietnam in 1998, and Vietnam joined the Multilateral Investment Guarantee Agency (MIGA) in 1995.

In October 2016, then-OPIC President and Chief Executive Officer (CEO) Elizabeth Littlefield visited Vietnam to develop private-sector investment opportunities in Vietnam. In January 2017, former Secretary of State John Kerry along with OPIC presented a letter of intent to Fulbright University Vietnam to support the design and construction of the university’s main campus in HCMC, which will bolster the university’s academic programs as well as expand enrollment up to 7,000 students. In November 2017, OPIC President and CEO Ray W. Washburne presented a letter of intent to Virginia-based energy company AES to support the construction of a liquefied natural gas (LNG) terminal plant and 2,250MW combined cycle power plant in Vietnam which would provide around 5 percent of the country’s power generation capacity.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy