Vietnam: Opening up to foreign companies

Author: | Published: 24 Aug 2015
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In 2007, Vietnam pledged to the WTO (World Trade Organization) to gradually allow companies from other WTO member countries to open their branches in Vietnam. Such commitment was given on the proviso that such companies operate in certain business sectors, including legal, banking, computer services, management consultancy, construction, and non-life insurance. Eight years later, foreign companies still find it impossible to set up their branches in Vietnam, except for those engaged in highly-regulated sectors (such as banking and legal) where local regulations providing for conditions and procedures in establishing branches are already in place.

In fact, since 2006, Vietnam has had its own legislation regulating the establishment and operation of representative offices and branches of foreign commercial entities – Decree 72/2006/ND-CP (Decree 72). However, in practice, only the provisions concerning representative offices have been applied, enabling thousands of representative offices to be set up. Meanwhile, the provisions regulating branches have remained useless and inoperative, closing doors to the establishment of branches.

Hopefully, Vietnam's over-promising and under-delivering will soon be remedied. In June 2015, the government released the third draft of a decree which is expected to repeal Decree 72. Under this draft decree, foreign companies providing management consultancy services, computer services, and construction services, among others, will be able set up branches in Vietnam after getting a licence from the relevant ministries (including the Ministry of Industry and Trade, Ministry of Information and Communications, and Ministry of Construction). Notably, one of the conditions for the issuance of a licence is that the foreign company must have been operating for at least five years since its establishment. Further, the licence will have a lifespan of a maximum of five years and is renewable. The draft decree does not cover branches of companies which engage in special sectors (such as tourism, aviation and education) as these are governed by special legislations.

Drafting and finalising a governmental decree take months to accomplish. However, at least foreign investors are now seeing the light at the end of the tunnel. If the draft decree is adopted in its existing form, foreign investors will have an alternative way in which to enter the Vietnamese market, other than incorporating subsidiaries and acquiring local companies.

Truong Huu Ngu