New bill on amendments to investment regulations which may adversely affect foreign investment in Vietnam

As certain obstacles have been experienced by investors since the implementation of Law on Investment No. 67/2014/QH13 (the “LOI”), the Ministry of Planning and Investment has proposed the bill on amendment to the LOI (the “Bill”) to enhance the effectiveness of the legal framework on investment.

The Bill proposes several new definitions, including the terms “investment and business conditions” and “investment conditions applied to foreign investors”. Since the current LOI does not provide any explanation of these terms, it is not clear when some foreign investment procedures (e.g. acquisition approval procedure) are applied to certain kinds of foreign investment. In practice, the authorities adopt a conservative view, requiring acquisition approval for both foreign investment in an economic organization conducting business and investment having “investment and business conditions” and “investment conditions applied to foreign investors”. The inclusion of the abovementioned terms in the Bill clarifies which types of foreign investment are required to apply the foreign investment procedures under the LOI.

The Bill amends and supplements the cases where foreign investors need to obtain acquisition approval for contribution or acquisition of capital in an economic organization in Vietnam. Under the Bill, the acquisition approval is necessary if: (i) the total ratio of foreign invested capital in an economic organization currently conducting business and investment having investment conditions applied to foreign investors, is increased, (ii) the total ratio of foreign invested capital in an organization is increased from less than 51% to 51% or more of its charter capital, or is increased when the total ratio of foreign invested capital have been more than 51% of the carter capital, or (iii) the contribution or acquisition of capital in an enterprise organization that uses land in islands and/or borders or other areas that may affect to the national defense and security. Accordingly, the Bill has made clear that the acquisition approval is not applied to the case where the total ratio of foreign invested capital in an economic organization is not increased except in case (iii).

The Ministry of Planning and Investment is collecting opinions and comments regarding the Bill from interested parties. If the Bill is approved by the National Assembly, it is a potential step to attract more foreign investment into Vietnam by providing a clear regulation and less burdensome procedure on investment.