VIETNAMESE INVESTMENT ENVIRONMENT IN

COMPARISON WITH OTHER ASIAN COUNTRIES

2.1. Current situation and rankings of Vietnamese
investment environment
2.1 Current situation attracting foreign investment in Vietnam:
2.1.1. Current situation attracting foreign investment in Vietnam the previous year:
With the political - social stability, economic growth and young, hardworking workforce,
Vietnam is considered a potential market for foreign investors. Attractive investment
environment of Vietnam, especially labor costs and a stable political situation, are trying to
convince foreign companies to choose this place as a basis for regional investment. But beside
that there are still many problems. For more than 25 years of innovation, economic growth in
Vietnam has continued at high levels, approximately 7%. Investors around the world were
interested in Vietnam market. According to data from GSO & Vietstock forecast, we can see the
total FDI and ODA in Vietnam over the past year as follows:
Feature
Unit
2007
2008
2009
2010
Implemented
Billion USD
21.34
72.00
21.50
35.00
FDI
Disbursement
8.03
11.70
10.00
12.00
FDI
Committed
3.75
5.03
5.42
8.10
ODA
Disbursement
2.00
2.20
2.50
2.80
ODA
Source: GSO and Vietstock Forecast
Registered FDI capital in Vietnam has constantly increased over the years: in 2007 it reached
USD 21.3 billion, contributing 16.3% of the national GDP; in 2008 this figure amounted to 72
billion dollars. However, the influence of the economic crisis makes Vietnam FDI reduce to 21.5
billion dollars in 2009, only 29.86% compared to 2008. Overcoming the crisis, FDI can reach
$35 billion in 2010, committed ODA also increased continuously at a rate relatively stable over
the years: from 3.75 billion in 2007 increased continuously until 2010, reaching $ 8.1 billion.
Generally, the numbers assessed by the investors, Vietnam is an attractive destination.
Proportional contribution to the total GDP of foreign investment in Vietnam has constantly
increased over the years. As we know from 1996, investors tend to focus on building
infrastructure, the labor intensive industries, the production of goods for export and the
production of goods for import substitution. In recent years, the number of project which has
100% foreign capital also began to rise. Foreign investment projects in Vietnam under licensed
BOT also increased significant.

FDI inflows into Vietnam in the period 2008-2013 fluctuated over the years. According to
the Ministry of Planning and Investment, FDI inflows increased for 3 consecutive years and in
2013 even though Vietnam's economy and the world is
difficult, but we achieved very good results in attracting FDI. In particular, Vietnam's FDI in
2013 reached nearly $ 22 billion in registered capital, up 54% compared to
2012; disbursements higher, up to $ 11.5 billion. In 2008, FDI into the country increases
particularly strong because Vietnam has joined the WTO to Vietnam market more open to
international investors and investment environment is also somewhat more complete. In 2009,
FDI flows into Vietnam fell sharply, with only 30% compared to 2008 due to the impact of the
world economic crisis. Between 2009 and 2013, FDI into the country tends to decrease; only FDI
in 2013 was only increased. Especially in our country's FDI reached a record in 2008, reaching $
64 billion. Currently, Vietnam has attracted nearly 40 countries around the world to invest in
Vietnam. Maybe at some countries: the United States among the leading foreign investors in
Vietnam.
Specifically, according to the FIA, within 7 months, HCM City attracted nearly 550 million
dollars from the newly licensed projects and the projects are adjusted to increase the capital.
Compared to the current leading position of Thanh Hoa, the capital of Ho Chi Minh City is less
than one fifth.
Similarly, Hanoi in the past 7 months attracted more than 408 million dollars of new and
increased investments, ranked No. 9.
Although Hai Phong in the past two years has the changing attraction of FDI , over the past 7
months it only attracted about 380 million dollars, ranking 10th in the country.
Da Nang also attracted the interest of foreign investors towards the central market, but in the past
seven months the city also attracted about 27 million dollars ...
Northern Region and North Central provinces such as Bac Ninh, Thai Nguyen, Thanh Hoa, ... are
the "new land" has not been previously noticed however, that many land mass, population
abundance , better incentives are attractive destination of investors. These big investors are
familiar, such as Japan, Korea, Taiwan ... with this shift.

This explains why in the past 7 months provinces such as Thanh Hoa, Thai Nguyen, Bac Ninh
has in turn led to attract FDI.
Provinces / cities to receive FDI in 2013

FDI in Vietnam (classified by economic sectors) in the first 6 months of 2014

Obviously the majority of FDI mainly in the processing industry reached $494 million; FDI in
wholesales, retails and fix reached $83 million, specialized activity and technology science
reached $74 information and media reached $63 million r; and investment in the construction
sector reached $62 million. The last three sectors to attract FDI were healthcare and social help,
electricity, air, water, conditioner and mining.
2.1.2 Current situation of attracting foreign investment into Vietnam in the first 6 months of
2014:
There are 41 countries and territories have invested projects in Vietnam in the first six months of
the year, which led South Korea with a total investment of newly registered and additional
capital of 1.55 billion USD.

Major FDI investors in Vietnam in the first 6 months of 2014

2.2 The position of Vietnam in the ranking of international investment environment:

2.2.1 According to the World Bank (World Bank):

Business Environment Report 2013 East Asia and the Pacific by the World Bank (World Bank),
said Vietnam ranks 99 on the ease of doing business,this is the second year in a row, Vietnam
rank remained the same. Out of the 10 index components are scored, only three indicators
promoted (starting business, Dealing with Construction Permits, Paying Taxes ), the rest are
relegated than ranking published last year. Report based on 9 indicators: Starting a Business,
Dealing with Construction Permits, Getting Electricity, Registering Property, Getting Credit,
Protecting Investors, Paying Taxes, Trading Across Borders, Enforcing Contracts, Resolving
Insolvency

In East Asia-Pacific region, 17 out of 24 economies reformed to cope with the global economic
crisis. Ranking of business environment in East Asia - Pacific region: Singapore is leading,
Vietnam ranks 93.
2.2.2 According to the World Economic Forum WEF:

Vietnam's ranking in global competitiveness has dropped from No. 65 out of 142 economies
ranked in the report of 2012, down to 75/144 in 2013. Therefore, Vietnams rank declined and
were relegated in 2013, the competitiveness of Vietnam has gone bad under the perspective of
the WEF. WEF assesses competitiveness of countries based on 3 main categories, including 12
different characteristics. The first category (the basic requirement) consists of 4 characteristics
which are institutions, infrastructure, macroeconomic environment, basic education and health
care. The second category (the efficiency improvement factor) consists of six characteristics higher education and training, the efficiency of commodity markets, the efficiency of the labor
market, the level of market development financial market, the level of technological readiness,
market size. Next category (factors in the creation and development) consists of two
characteristics: the development of enterprises, and creative energy. In each of these
characteristics includes many different factors to rank, for example, the institutional
characteristics include 21 factors, ranging from intellectual property rights to the level of investor
protection. There are many factors that Vietnams is almost at the bottom, such as the level of
investor protection, the burden of administrative procedures, auditing capabilities and reporting
standards, the quality of infrastructure in general.
2.2.3 According to Forbes magazine:
Values Calculated December 2013
Rank Name
GDP
GDP/Capita Trade
Population
Growth ($)
Balance as % (mil)
(%)
of GDP

101

102

103

104

Mozambique

Senegal

Sierra Leone

El Salvador

7.5

600

-16.7

24.1

3.5

1,000

-9.4

13.3

19.8

700

-25.7

5.6

1.6

3,900

-4.3

6.1

Rank Name

GDP
Growth
(%)

GDP/Capita Trade
Population
($)
Balance as % (mil)
of GDP

105

1.9

300

-16.2

16.8

6.5

900

-10.6

15.2

1.9

11,100

0.3

42.6

3.7

1,200

-2.0

193.2

-0.9

1,200

-8.4

5.5

2.6

600

-10.9

34.8

6.9

600

-14.0

48.3

8.0

600

-4.6

17.8

106

107

108

109

110

111

112

Malawi

Cambodia

Argentina

Pakistan

Kyrgyzstan

Uganda

Tanzania

Burkina Faso

Rank Name

GDP
Growth
(%)

GDP/Capita Trade
Population
($)
Balance as % (mil)
of GDP

113

5.0

1,500

-0.3

92.5

6.3

1,500

2.3

174.5

5.0

5,200

-1.7

15.4

2.2

3,000

-3.3

85.3

-1.5

2,700

-0.1

1.4

4.0

200

-13.6

10.9

3.8

800

-8.4

9.9

4.6

600

0.5

30.4

114

115

116

117

118

119

120

Vietnam

Nigeria

Ecuador

Egypt

Swaziland

Burundi

Benin

Nepal

Rank Name

GDP
Growth
(%)

GDP/Capita Trade
Population
($)
Balance as % (mil)
of GDP

121

5.2

1,800

-14.0

5.8

6.1

700

-0.8

163.7

-1.2

600

-13.8

16.0

9.7

3,000

-14.2

0.7

4.5

8,400

12.2

0.6

9.8

1,100

-4.4

22.4

8.3

1,400

0.3

6.7

3.3

2,200

-9.0

8.4

122

123

124

125

126

127

128

Nicaragua

Bangladesh

Mali

Bhutan

Suriname

Cote d'Ivoire

Laos

Honduras

Rank Name

GDP
Growth
(%)

GDP/Capita Trade
Population
($)
Balance as % (mil)
of GDP

129

5.2

2,600

1.0

10.5

6.2

11,200

20.4

1.6

2.5

5,500

9.6

38.1

-1.9

6,900

-1.3

79.9

0.1

1,400

-6.1

25.4

6.4

1,200

-15.7

3.4

4.7

1,200

-3.8

20.5

104.5

13,600

40.7

6.0

130

131

132

133

134

135

136

Bolivia

Gabon

Algeria

Iran

Yemen

Mauritania

Cameroon

Libya

Rank Name

GDP
Growth
(%)

GDP/Capita Trade
Population
($)
Balance as % (mil)
of GDP

137

3.9

500

-16.9

1.9

7.0

400

-7.0

93.9

2.8

800

-19.1

9.9

5.5

13,400

5.4

28.5

8.4

6,400

14.4

18.6

4.4

700

-5.3

13.2

6.3

1,000

-1.7

55.2

5.0

1,000

-18.2

11.2

138

139

140

141

142

143

144

Gambia

Ethiopia

Haiti

Venezuela

Angola

Zimbabwe

Myanmar

Chad

Rank Name

GDP
Growth
(%)

GDP/Capita Trade
Population
($)
Balance as % (mil)
of GDP

3.9

500

Guinea
145

-31.1

11.2

The level of investor protection is also a factor that makes Vietnam down in business
environment ranking (Best Countries for business) recently published by Forbes magazine.
Vietnam's position in the business environment assessment of Forbes is 113/145. WEF also lists
the factors that most interfere most business activities in the country ranked in the report. For
Vietnam, the top 5 barriers including access to capital, inflation, low level of policy stability,
inadequately trained labor force, and limited infrastructure. Forbes reports still appreciate
Vietnam's economy in many ways as the Government's efforts in developing the economy and in
the direction of the market and international integration, the percentage contribution of
agriculture sector in GDP fell, the poverty rate is reduced, the growth stimulus is applied actively
during the global recession...
Although being higher than statistics of last year's report, the competitiveness of Vietnam under
the WEF is still lower than most other countries in Southeast Asia such as Singapore, Malaysia,
Brunei, Thailand, and Indonesia.

2.2. Determinants of Vietnamese investment environment

GOVERNANCE COMPONENT
Rule of Law
The Investment Law of 2005 provides the legal framework for foreign
investment in Vietnam, together with its implementing decrees and circulars,
regulates investment in Vietnam, including investors rights and obligations,
investment incentives, state administration of investment activities, and
offshore investment.The Investment Law also designates prohibited and
restricted sectors for investment, but there are additional laws that apply
conditions to investments in sectors such as mining, post and
telecommunications, property trading, banking, securities, and insurance.
The Investment Law provides for five main forms of foreign direct
investment: (1) 100 percent foreign-owned or domestic-owned companies;

(2) joint ventures (JV) between domestic and foreign investors; (3) business
contracts such as business cooperation contracts (BCC), build-and-operate
agreements (BOT and BTO), and build and transfer contracts (BT); (4) capital
contribution for management of a company; and (5) merger and acquisitions
(M&A). Foreign investors can, with restrictions, invest indirectly by buying
securities or investing through financial intermediaries.
With the Investment Law set as the base legal framework, Vietnam
revamped much of its legal system, making revision of other major legal
framework, specifically Land Law, Civil Code, Labour Code, Law on Securities,
Law on Competition, Enterprise Law in order to make investment
environment more transparent and more conform to international standards
in all aspects.
Take a specific example of The Land Law of 2003: it extended land-use
rights to foreign investors, allowing title holders to conduct real estate
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. Certain foreigners can own apartments, durable construction,
durable trees and planted forests for production purposes in Vietnam, but not
the associated land.
Openness to International Trade and Business
Vietnam became the 150th member of the World Trade Organization on
January 11, 2007. Vietnams commitments under the WTO increase market
access for exports of goods and services and establish greater transparency
in regulatory and trade practices as well as a more level playing field
between 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 implement agreements on
intellectual property (TRIPS), investment measures (TRIMS), customs
valuation, technical barriers to trade, sanitary and phyto-sanitary measures,
import licensing provisions, anti-dumping and countervailing measures, and
rules of origin. Vietnam has made progress in implementing its bilateral (58
bilateral agreements) and international obligations; however, concerns
remain in many areas such as protection of intellectual property rights (IPR)
and effectiveness of the court/arbitration system.
The government of Vietnam (GVN) holds regular business forum meetings
with the private sector, including both domestic and foreign businesses and
business associations, to discuss issues of importance. Foreign investors use
these meetings to draw attention to investment impediments in Vietnam.
These fora, together with frequent dialogues between GVN officials and

foreign investors, have allowed foreign investors to comment on many legal

and procedural reforms.
World Banks Ease of Doing
Business: Vietnam ranking

2013
Rank

2012
Rank

Change in
Rank

Overall

99

99

No change

Starting a Business

108

109

+1

Dealing with Construction Permits

28

27

-1

Getting Electricity

155

157

+2

Registering Property

48

48

No change

Getting Credit

40

38

-2

Protecting Investors

169

167

-2

Paying Taxes

138

153

+15

Trading Across Borders

74

74

No change

Enforcing Contracts

44

41

-3

Resolving Insolvency

149

145

-4

Under the current law of Vietnam, there are various preference and incentive
to investors who have investment projects in preferential investment
projects/factors such as:
Corporate Income Tax exemption (CIT) and CIT reduction from the first profit
making year
A preferential CIT rate from 10% to 20%
Import duty exemption on the importation of equipment, material, means of
transportation and other goods for implementation of investment project in
Vietnam in accordance with the Law of Export and Import duties
Land rental exemption or Reduction
Accelerated depriciation of fixed assets

Losses carry forward

Political stability
As the world continues to reel from the economic slowdown and a possible
crisis is looming , Vietnam still counts on political stability to continue
attracting foreign investment.
Vietnam Political stability index (-2.5 weak; 2.5 strong): For that indicator,
The World Bank (govindicators.org) provides data for Vietnam from 1996 to
2013. The average value for Vietnam during that period was 0.24 points with
aminumum of 0.1 points in 2003 and a maximum of 0.46 points in 2005.

The index for Political Stability and Absence of Violence in Vietnam measures
perceptions of the likelihood that the government of Vietnam will be
destabilized or overthrown by unconstitutional or violent means, including
politically-motivated violence and terrorism.

Inflation is at an all-time high due to the surge in oil prices, though

pressure is now easing somewhat.

Improvements needed in educational and training systems.

Infrastructure that still lacks expressways, bridges, with inadequate

ports, narrow and clogged roads.

Lack of supporting industries that could feed into the bigger industries
being established in the country.

Corruption that is prevalent at many levels, as in many Asian countries.

Environmental issues are taken for granted, although this is gradually

improving.

Lack of intellectual property rights, something that is improving but

still remains an issue of big concern.

.
Taxation
Vietnam does not tax profits remitted by foreign-invested companies.
However, companies are required to fulfill their local tax and financial
obligations before remitting profits overseas and are not permitted to
accumulate losses, and the government has shown a strong interest in

investigating alleged transfer pricing. A new personal income tax regime

placing Vietnamese and foreigners on the same tax rate schedule took effect
in January 2009. The new law regulates all types of personal income,
including income previously subject to other laws such as income from
individual businesses and property sales. The lowest tax rate is 5 percent
while the highest is 35 percent
Taken effect from January 1, 2014,the GVN approved to lower corporate
income tax rates from the current 25 percent to 20 percent for small- and
medium-sized enterprises and 23 percent for all other enterprises. Corporate
income tax for extractive industries varies from 32 to 50 percent depending
on the project, and can be as low as 10 percent if an investment is made in
selected priority sectors or in remote areas. Incentives are the same for both
foreign-invested and domestic enterprises.
Corruption
Corruption in Vietnam is due in large part to a lack of transparency,
accountability, and media freedom, as well as low pay for government
officials and inadequate systems for holding officials accountable for their
actions. Competition among GVN agencies for control over business and
investments has created a confused overlapping of jurisdictions and
bureaucratic procedures and approvals that in turn create opportunities for
corruption. The 2012 Transparency International Corruption Perceptions
Index ranked Vietnam 123 out of 176 countries. These are some of the
governments actions to tackle with Corruption in oder to create
transparency for investment climate:
- Vietnams 2005 Anti-Corruption Law requires GVN officials to declare their
assets and sets strict penalties for those caught engaging in corrupt
practices. The GVN signed the United Nation Convention on Anti-Corruption
in July 2009.
-The Government has tasked various agencies to deal with corruption,
including the Steering Committee for Anti-Corruption (led by the Prime
Minister), Government Inspectorate, and line ministries and agencies
-Vietnams 2011 Provincial Competitiveness Index (the latest available),
supported by USAIDs VNCI Project in partnership with the Vietnam Chamber
of Commerce and Industry, surveyed 1970 foreign-invested enterprises and
6922 local enterprises regarding the number of firms that had paid informal
charges to public officials. Index

2012
Rank

2011
Rank

Change in
rank

Transparency International
Corruption Perceptions Index

123/176

112/183

-11

Heritage Foundation Index of

Economic Freedom

136/179

139/179

+3

INFRASTRUCTURE COMPONENT
Infrastructure

Vietnamese government has recognized the importance of having efficient

infrastructure of economic development. Accordingly, there have been
various program to upgrade and expand the existing infrastructure. The main
transport and communication network in Vietnam are road, railway, shipping
lines and airlines. Sea transport remains an important aspect of trade both
domestically and internationally.
Fiscal and Monetary administration
Vietnams financial system remains weak. A lack of financial transparency
and non-compliance with internationally accepted standards among
Vietnamese firms are among the many challenges facing the GVNs plan to

expand the domestic stock and securities markets as a venue for firms to
raise capital domestically.
The banking sector is underdeveloped and is now the subject of a national
restructuring initiative to address high non-performing loans (NPL), and other
structural problems:
- March- 2012: 20% of Vietnamese residents had a bank account
-Most domestic banks are under-capitalized and reportedly hold a large
number of NPLs
--Sep 30-2012: the official NPL rate was reported at 8.82 percent
Vietnams banking market is highly concentrated at the top and fragmented
at the bottom. The four largest banks (Vietcombank, Vietinbank, the Bank for
Agriculture and Rural Development, and the Vietnam Bank for Investment
and Development) are state-owned or majority state-owned, accounting for
approximately 58 percent of domestic lending, 46 percent of the total assets,
and 37 percent of equity capital in the banking sector as of December 2011
The GVN has initiated banking reforms intended to improve the efficiency of
the banking system, especially via the equitization (or privatization) of stateowned commercial banks. Vietcombank and Vietinbank conducted initial
public offerings (IPO) in December 2007 and December 2008, respectively,
and both were listed on Vietnams stock market in 2009. The Vietnam Bank
for Investment and Development was equitized on December 28, 2011. The
state remains the controlling shareholder in these banks.
The Vietnamese stock market includes two stock exchanges: Ho Chi Minh
City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX). As of
December 26, 2012, 308 stocks were listed in the HOSE with total market
capitalization of approximately $10.78 billion, and 395 companies were listed
in the HNX with total market capitalization of approximately $4 billion. The
majority of listed firms are former SOEs that have undergone partial
privatization (equitization). A new trading floor for unlisted public
companies (UPCOM) was launched at the Hanoi Securities Center in June
2009. At the end of 2011, 132 companies were listed on UPCOM. In
September 2009, a separate trading floor for government bonds was
established.

Millennium Challenge
Corporation

2012 score (%
ranking in peer

2011 score (%
ranking in peer

group)

group)

MCC Government Effectiveness

0.6 (95%)

0.55 (95%)

MCC Rule of Law

0.43 (84%)

0.44 (81%)

MCC Control of Corruption

0.25 (65%)

0.20 (71%)

MCC Fiscal Policy

-4.5 (30%)

-5.3 (14%)

MCC Trade Policy

78.6 (90%)

79.6 (88%)

MCC Regulatory Quality

0.15 (60%)

0.15 (63%)

MCC Business Start Up

0.96 (86%)

0.96 (77%)

MCC Land Rights Access

0.68 (80%)

0.74 (85%)

MCC Natural Resource

Management

53.6 (44%)

80.18 (97%)

MCC Access to Credit

44 (84%)

49 (91%)

MCC Inflation

18.7 (8%)

9.2 (32%)

Foreign Direct Investment 2005-2012

(All monetary amounts in billions of U.S. dollars)
Source: GVNs Foreign Investment Agency
Number of new
projects
authorized

2012
2011
2010

1100
1091
969

Authorized
Investment
(including new
and extended
projects)
13
11.6
18.6

FDI by Major Sector 1988-2012

(All monetary amounts in billions of U.S. dollars)
Source: GVNs Foreign Investment Agency

Implemented
Investment

10.5
11
11

Industry and
manufacturing
Real estate
Hotels and tourism
Construction
Communications
Extractive
Agriculture, forestry
and fishery
Transportation and
Warehouse
Finance and banking
Education

Number of Projects
Authorized
8132

Authorized investment

389
332
926
815
77

50
10.6
10.3
6.1
3.1

503

3.4

348

3.5

76
160

1.3
0.4

106

2.3. Achievements and limitations of Vietnamese

investment environment
2.3.1 Achievements:
International relations:
As of July 2013, Vietnam has established diplomatic relationship with 184
countries throughout the world including permanent members of United
Nations Security Council. Viet Nam joined the United Nations in 1977.
Vietnam became an official member of the Association of South East nations
(ASEAN) in 1995, and has concluded a cooperation agreement with the
European Community. Relationships with multi-national financial institutions
such as the World Bank (WB), the International Monetary Fund (IMF) and the
Asian Development Bank (ADB) have been re-established. Vietnam has been
participating in the ASEAN Free Trade Area (AFTA) since 1996 and became a
member of the Asia Pacific Economic Cooperation Forum (APEC) in 1998.
Vietnam became an official member of the World Trade Organization (WTO)
on 11 January 2007. In January 2008, the country started a two year term as
an elected non-permanent member of the UN Security Council
Vietnam signed the bilateral trade agreement (BTA) with the United States
in 2000. Besides aspects off international trade, the BTA covers a variety of
other areas, including intellectual property rights, trade in services,
development of investment relations, business facilitation and the obligation
to ensure transparency of laws and regulations. The BTA essentially
constitutes a commitment by both countries to open their markets to each
other.

Investment Guarantees:

The Government of Viet Nam guarantees fair treatment for investors. Capital
and other legal assets of investors will not be expropriated or confiscated by
law or administrative measures and businesses with foreign-invested capital
will not be nationalised. Foreign investors are allowed to remit abroad
investment capital and profits, loan principal and interest, and other legal
proceeds and assets.
Expatriates working for businesses with foreign-invested capital or for a
business cooperation contract (BCC) are permitted to remit their income
abroad. The Government of Viet Nam respects intellectual and industrial
property rights and the interests of foreign investors relating to technology
transfers into Viet Nam.
Interests of foreign investors are satisfactorily guaranteed in the event of
adverse effects caused by a change in law through the application of a
number of measures. The Law on Investment warrants that such changes will
be disregarded or that disadvantages to the investor stemming from a
change in law will be compensated by being permitted to amend its
operations, to be entitled to compensatory tax exemptions, or by other
means of compensation. Moreover, where more favourable provisions are
enacted, existing investors will be entitled to the benefits stemming from
such provisions. Disputes of foreign investors can be brought before
Vietnamese arbitration centres or before a court, or foreign arbitration can
be agreed to in a contract by the parties. By 2008, the Vietnamese
Government had entered into bilateral agreements in trade relations with 89
countries including 72 on the Most Favoured Nation status (now known as
Normal Trade Relations) and double taxation agreements with 45
countries.

Infrastructure
Highway system
The road system consists of over 200,000 km network including over 10,000
bridges. However road conditions are not ideal, less than half of the national
highways have two lanes or more. In addition, road congestion is increasing
in major cities. In recent years, the Government has mobilised a significantly
large amount of capital to upgrade the highway system with financial
support from international lending agencies.
Railway
The rail network consists of about 2,600 km of singletrack line
covering several routes. There are about 260 stations in the network. The
longest and most important route is the Hanoi Ho Chi Minh City line, which
stretches for 1,730 km. This line is now serviced by an express train, which
makes the journey in approximately 29.5 hours. The lines connecting Viet
Nam to China were re-opened a few years ago.
Inland Waterways

Often overlooked by foreign investors, the inland waterway system offers a

cheap and flexible mode of transport. Viet Nam has more than 2,300 rivers
and canals with total length of 198.000 km. Currently, the inland waterway
has a system of over 61,000 km. The two major inland waterway systems
serve as major transportation outlets. The first major inland waterway
system is in the Red River area in the north which stretches for
approximately 2,500 km. Along this system there are five main ports, of
which Hanoi is the largest. The second major inlandwaterway extends 4,500
km along the Mekong River and its tributaries in the South and boasts about
30 ports, including Ho Chi Minh City.
The larger river vessels are tug-drawn barges. Official estimates put the
fleet capacity at about 420,000 tons with speeds ranging from 2 to over 20
km an hour. Smaller, wooden barges are mostly privately owned.
Ports
Viet Nam has eleven major seaports. Ho Chi Minh City serves most of the
South and now boasts modern container loading facilities. Just a few hours
drive from Hanoi, Hai Phong serves much of the North. Given the rapid rise in
trade volume, increasing port capacity is a national priority.
Airports and Civil Aviation
There are three international airports: Ho Chi Minh City, Hanoi and Da Nang.
Currently, the Government has significantly upgraded international airports
to handle the increase in the volume of traffic associated with Viet Nam's
invigorated economy. A new international terminal of the Tan Son Nhat
airport in Ho Chi Minh City, capable of handling up to 10 million passengers a
year was opened in December 2007. Noi Bai airport in Hanoi was upgraded,
enlarged and completed for operation in 2002, construction of a second
terminal is expected to start in October 2008 and completed in two years.
Four new international airports are planned to be constructed in Phu Quoc,
Dong Nai, Lao Cai and Quang Ninh provinces. Preparations for the new Long
Thanh International Airport, 40 kilometers from Ho Chi Minh City in Dong Nai
province is underway. The airport is scheduled to open in 2010 and by 2015
it will be further expanded to reach an annual transportation capacity of 80
to 100 million passengers, becoming one of the biggest airports in the
region. In addition, there are 16 other domestic airports around the country.

Telecommunications
Viet Nam has made great strides in upgrading its telecommunications
systems, although much remains to be done. In the last six years, the annual
growth of the telecommunication market in Viet Nam reached 30%,
specifically, in 2005 and 2006, the growth rates were more than 50%. In
2007 only, the number of new subscribers was 9.8 million (of which 8.8
million new mobile subscribers). The country has achieved more than 30
phones per 100 people with 19 million mobile subscribers. The Governments

relaxation with regard to international calls made over the internet and the
spread of mobile phone subscriptions have further improved the
telecommunication landscape, especially in rural areas. Internet usage has
also rapidly risen and by the end of 2007 there were over an estimated 18.2
million users.

Banking and Finance

Viet Nams credit institutions comprise State-owned banks, joint-stock
banks, joint venture banks, 100% foreign-owned banks, branches of foreign
banks, credit cooperatives, finance leasing companies and finance
companies. The banking sector has been expanding at around 20% per
annum since the beginning of the decade and has now reached some $80
billion in total assets. The four largest state-owned banks hold around 70% of
the credit market. Lending grew by 37% in 2007 to reach some $60 billion,
although the government is now seeking to impose tighter controls on
borrowing as part of its plans to curb inflation. The loan to GDP ratio rose
from 72% to 85% in 2007, balanced by an increase in the deposit to GDP
ratio from 78% to 92%. The revenues of the top 10 banks increased by an
average of more than 50% and their profits by an average of 195% in 2006,
as demand soared, efficiency improved and costs decreased. In 2007, 9 new
domestic joint stock banks have received the approval in principle for
establishment.
These new banks are expected to commence the operation in 2008.
Under WTO commitments, Viet Nam committed to permit the establishment
of 100% foreign-owned banks from 1 April 2007. The scope of operations of
foreign bank branches, joint venture banks and 100% foreign-owned banks
has also gradually expanded to comply with Viet Nam's commitments under
the WTO and other bilateral/multilateral international agreements. After 5
years from the date of accession to WTO, Viet Nam must lift all restrictions to
the right of a foreign bank branch to accept deposits in Vietnamese Dong
from Vietnamese persons with whom the bank does not have a credit
relationship.

Labour
A large, skilled and inexpensive labour force is one of the main attractions
for foreign investors in Viet Nam.
Viet Nams population was estimated at approximately 85 million and is
expected to grow to 90 million in 2010 with an annual growth rate of 1.6%.
Around 60% of the population are under 25 years of age. Approximately
15.5% of the population are considered to be trained or skilled workers (with
elementary qualifications or higher). This situation is improving as a result of
updated training programs in training and education centres. There are
currently substantial interest and new investments in quality training and
education, a priority concern for the Government.

The Labour Code issued in July 1994 (as amended in 2002 and 2006)
has created a legal
framework that sets out the rights and obligations of employers and
employees with respect to
working hours, labour agreements, payment of social insurance, overtime,
strikes, and termination of employment contracts, among other things. In
addition, there are several specific implementing decrees and circulars
guiding the provisions of the Labour Code.
The law provides for an 8-hour working day and a 48-hour working week. An
employer and an employee may agree that an employee work overtime,
provided that the total overtime worked does not exceed 200 hours per year
(in special cases, this limit may be extended to a maximum of 300 hours,
subject to the approval of the relevant competent State authority). Beginning
in 1999, a number of organisations such as Government offices,
administrative agencies and socio-political organisations have implemented
a 40 hour working week. Businesses in other economic sectors, including
businesses with foreign-invested capital, are also encouraged to adopt a 40hour week.

Intellectual Property
In recent years, the Government has taken various measures to increase the
legal protection of intellectual property and has created an environment of
respect for intellectual property as compared to other neighbouring
countries. Intellectual property rights are protected by the Civil Code (1995
and 2005), the Law on Intellectual Property (2005) and a host of subordinate
legislation. Viet Nam is a long-time signatory to the Paris Convention, the
Madrid Agreement on International Trademark Registration, and the Patent
Cooperation Treaty (PCT) and became a member of the World Intellectual
Property Organisation in 1976. On 27 June 1997, Viet Nam entered into an
Agreement on copyrights with the US. According to the Viet Nam-US Bilateral
Trade Agreement, Viet Nam is under the obligation to adhere to the Berne
Convention.
The National Office of Intellectual Property (NOIP) is the authority
responsible for the registration of industrial property and for the resolution of
disputes with regard to industrial property in the first instance. Foreign
organisations and individuals seeking to register their industrial ownership
should file their applications through an authorised agent, who will transfer
their application to the NOIP. The Office of Copyright Protection under the
Ministry of Culture, Sport and Tourism has also been established and is
responsible for the protection of copyright. Works may be registered with the
Office of Copyright Protection; however, registration is not a prerequisite for
copyright protection.
2.3.2 Limitations:

High costs of doing business are the first disadvantage for the foreign
investor. JETRO of Japan has regularly published comparison of business
costs among regional countries and the cost on international telephone calls,
Internet fees, and seaports are exorbitant. Vietnam still has a dual price
system for foreign investor and applies another Law on Promotion of
Domestic Investment for local investor. The Government has promised to
gradually abolish the dual price system and unify the two investment laws.
Corporate Tax and Personal Income Tax (50% of the gross income) are well
above regional average.
Infrastructure in Vietnam has been up-graded generally but the quality of
some public goods and services is low. Low stability, fluctuating tension,
sudden black outs in power supply create significant additional costs for
users and prevent investors to move high-tech investment into Vietnam. .
The advantage of low labor costs is diminishing gradually because of
increasing salaries but slower growth in productivity so that unit labor cost is
gradually rising.
Despite several amendments the Law on Foreign Direct Investment in
Vietnam is not competitive compared to some other regional investment
laws. Merger and acquisition are still very limited; a foreign investor is
entitled to buy only to maximally 30% of shares of equitized SOEs, even in
SOEs of the same industries where foreign investor could fully own an
enterprise. This restriction seems to overlook the recent wave of merger and
acquisition in
FDI in the region. JV with domestic private company requires a special
licensing procedure, more time consuming and more difficult. Distribution
rights are restricted, imposed local content requirement can only be reached
slowly due to the low development of domestic suppliers. Several industries
and markets are not yet open to foreign investors. The only legally permitted
form of company according to the Law on Foreign Direct Investment is until
now a limited liability company, pilot project on equitization of JVs needs to
be approved and implemented. The Stock Market in Ho Chi Minh-City is still
very small and restricted to foreign investor.
Despite tangible improvement in recent years, (especially the Enterprise Law
and the liberalization on trade legislation have been highly appreciated),
legal regulations in Vietnam are fast changing, less predictable and less
consistent, especially in tax, foreign exchange, labor regulation, land and
jurisdiction. Moreover, red tape, bureaucracy and low transparency are the
big weaknesses of the business environment in Vietnam: law enforcement is
not consistent and uniform in the country, the law interpretation and
enforcement depend too much on local agencies or lower ranking state
officials. For example customs officers in different seaports could apply to the
same product different tax rate. (Shipment into a Vietnamese seaport has to

finalize 127 different papers and documents compared to 7 at ASEAN

seaports).
The investment environment in province Binh Duong is very competitive,
costs in term of time and money for doing business is about a half of that in
some other provinces. Investors complain about extra law costs in transport,
irregularities in inspections, tax collections and others. PERC has ranked
Vietnam at 7th position among 11 regional economies in term of corruption
(2002), as position 1 is the least corrupt economy. Intellectual property rights
(e.g. copyright of software) is also a serious concern of foreign investors,
especially from the US despite Government efforts and commitments
The World Economic Forum has ranked Vietnam at position 62 among 73
economies in 2001 for competitiveness, a position Vietnam has to improve.
Recently in 2002 Standard & Poor's, Moody and Fitch have up-graded
Vietnam from B1 to BB in the financial risk rating, an encouraging sign of
improvement.

2.4. Asian investment environment

2.4.1. The overview of Asian investment environment
In 2013, the most notable changes in Asia Pacific Investment Climate Index
are the growing attractiveness of Southeast Asias economies in relation to
declining perceptions of the investment climate in China and India. Chinas
market access limitations, discriminatory treatment against foreign
enterprises, sharply rising costs and recent labor disputes, and Indias lack of
political will to reform and open up the economy, along with corruption and
excessive red tape are increasingly frustrating international companies.
Within Southeast Asia, the Philippines, Cambodia, and Myanmar experienced
the most significant gains. Singapore retained the first position in this years
rankings for the second consecutive year.
Indonesia and Vietnam have started to lose their luster to foreign investors,
who are increasingly deterred by rising protectionism, corruption, and
bureaucratic inefficiencies.
The Philippines and Cambodia rose, partially capturing the benefits of
Chinas decline and eroding wage advantage. Myanmars ascent in the
rankings indicates growing confidence in the countrys rapid economic and
political transformation. Malaysia and Thailand continue to hover behind the
East Asian economies of Taiwan, Japan, and South Korea for the third
consecutive year; endemic corruption and political uncertainty constrain the
countries ability to penetrate the top tier of the rankings.
Against the backdrop of China and Indias political stagnation and economic
slowdown, Southeast Asia is becoming an increasingly attractive destination
for foreign investment. Despite remaining challenges, Southeast Asias
rapidly expanding middle class, investments in infrastructure and human
capacity, and increasing public pressure for government accountability and

transparency are driving improvements in the regions attractiveness to

foreign investors. Preparations for the ASEAN Economic Community by 2015
and the Trans Pacific Partnership will require further liberalization and
economic integration that are likely to sustain the Southeast Asian
economies rise in the index.
In its inaugural appearance in the index, Brunei secured the fifth position, in
part as a result of its strong score on fiscal and monetary policy. Taiwan,
Japan, and South Koreas scores remain largely unchanged, although foreign
investors are hopeful that Japanese Prime Minister Shinzo Abes economic
strategy will reinvigorate the countrys stagnant economic growth.
Sri Lanka dropped significantly, due to the rise of the Philippines and
Cambodia and concerns over President Rajapaksas increasing consolidation
of power. Sri Lanka joins Laos and Bangladesh at the bottom of the rankings.
Although Laos accession to the WTO has led to improvements in its
regulatory and tax regimes, foreign investors lack adequate legal protections
and face the risk of expropriation. Bangladesh is similarly constrained by
endemic corruption and severe weaknesses in policy making, infrastructure,
in addition to widespread political violence and uncertainty.

2.4.2. The investment environments in some specific

countries
2.4.2.1. Singapore

Singapore tops 2013s rankings for the second consecutive year. Scoring
consistently high across all six pillars, Singapore offers a stable political and
legal environment and prudent macroeconomic policies that help attract
foreign investment.
Singapores trade regime is open and competitive, with few tariffs imposed
on imports. Competitive tax rates, a transparent regulatory environment, and
an efficient judicial framework further bolster foreign investment.
Even so, Singapore slipped to second in political stability, mostly as a result
of rising political activism and challenges to controversial domestic policies.
In the most recent election, the Peoples Action Party (PAP), which has ruled

the country since independence, endured its worst performance in the polls
since separating from Malaysia in 1965.
Singapore also fell behind Hong Kong in openness to international trade and
business. As Singapore seeks to address immigration concerns, increasing
restrictions on hiring foreigners have impacted companies across industries,
from construction to professional services.
Singapores liberal immigration policies have become an extremely sensitive
political issue in the city-state, as population density exacerbates
competition for employment and housing, contributes to rising prices, and
strains infrastructure. The publication of a government white paper in early
2013, which projects a rapid rise in the foreign population by 2030,
instigated the countrys largest protest since independence.
New licensing requirements for online news sites further riled some citizens,
who faulted the government for using old tactics to control new media. The
policy move also resulted in another large protest organized and supported
by prominent online commentators and bloggers.
The PAP is trying to balance local concerns without abandoning the policies
that attract foreign investors and MNCs, the irony being that the PAP is, to
some extent, a victim of its own success in bringing such high levels of
economic growth. The PAPs ability to navigate the growing social and
economic challenges will underpin the countrys ability to continue to attract
foreign investment in the coming years.

2.4.2.2. Thailand

Thailand remains in the middle tier of rankings, with political stability, fiscal
& monetary administration and corruption remaining weak.
The country has experienced relative stability since Prime Minister Yingluck
Shinawatras decisive victory in 2011, however, accusations of widespread
graft and the governments renewed legislative push to amend the
constitution threaten to further political conflict with opponents in the
judiciary and elsewhere in the Establishment.
Thailand maintains an open, market-oriented economy and encourages
foreign direct investment to promote economic development and technology
transfer. The Thailand Board of Investment is eager to attract major foreign
manufactures and incentivizes companies with corporate tax exemptions,
reductions of import duties, or deductions of infrastructure costs. As a result,
foreign investment has returned with renewed confidence following the 2011
floods that damaged infrastructure and production facilities. High end
manufacturing is surging, with Honda and Toyota recently opening assembly
plants.
Thailands geographic location and robust infrastructure continue to attract
foreign investors, who use Thailand as a hub to connect to the surrounding
Mekong subregion. The government recently announced plans to spend
USD67 billion by 2020 on high-speed trains and mass-transit networks to
facilitate greater domestic and regional connectivity. As Myanmar develops,
Thailand is preparing to capture the spillover benefits, and officials continue
to dream about developing and connecting to the Dawei Port in Myanmar.
Investors continue to cite Thailands efficient workforce and well educated
population as a reason to invest. Yet, the further development of the Mekong
subregion could undermine Thailands supply of cheap labor, as fast growing
economies lure migrants home.
Finally, Thailands score on fiscal & monetary administration declined amid
the countrys controversial rice-pledging scheme, which has increased the
cost of rice and eroded Thailands share of the rice market. The subsidies
continue to dampen Thailands export competiveness and the rice-trading
industry, leading to higher budgetary losses.

2.4.2.3. China

China dropped from ninth to eleventh in 2013s index, resulting from

declines in openness to international trade & business, political
stability, and taxation.
The perception of Chinas openness to international trade and business
continues to decline, and investors expressed frustration over market
access limitations and discriminatory treatment, including state
subsidies and exemptions for domestic companies. SOEs continue to
dominate a number of sectors and receive preferential credit treatment
by government banks.
Upon taking office as General Secretary of the Party, Xi Jinping
declared his commitment to fight corruption and pursued a high profile
case against the Ministry of Railways. However, critics maintain that
meaningful progress against government corruption cannot occur
without greater government transparency and an independent
judiciary.
Chinas new leadership has also indicated that they intend to address
structural problems with the economy, aiming to reduce reliance on
exports and promote domestic consumption.
Chinas political stability score declined against the backdrop of
growing public unrest. The widening income gap and frustration with

corruption has fuelled several recent protests. The expansion of social

media has empowered citizens to challenge government policies. With
slowing GDP growth and growing domestic discontent, China is
becoming increasingly assertive on the international stage.
The past year also saw escalating tensions with neighbors over
territorial disputes. This has been particularly true for Chinas relations
with Japan, contributing to the relocation of several Japanese firms
from China to Southeast Asia. China has also strained relations with
partners in Southeast Asia as a result of its aggressive positioning on
territorial disputes in the South China Sea. Vietnam, Philippines,
Malaysia, Indonesia, and Brunei have expressed increasing concern
over the issue, which has created tension at ASEAN since the ASEAN
Ministerial Meeting last year in Cambodia.
Labor issues are also becoming more frequent. Ongoing labor unrest at
Foxconn forced the company to nearly double wages, and in June,
workers in a medical supply factory in China held their American
bosses hostage for nearly a week.
The investment climate in China is likely to become more complicated
as investors increasingly face widespread pollution, higher wages, and
extensive state involvement in the economy.

2.4.2.4. Cambodia

Although Cambodia rose in 2013s rankings, the improvement is

largely due to relative declines in in the investment climate in Vietnam
and India, rather than changes in Cambodias investment climate.
Cambodia scores relatively well on taxation, but remains weak across
all other measures, particularly fiscal & monetary administration,
corruption, and rule of law.
Cambodia remains politically stable under the Cambodian Peoples
Party (CPP), which is expected to retain its unchallenged control in the
upcoming national elections. Despite several government-led reforms
to attract foreign companies, it remains to be seen whether these
initiatives will be consistently implemented to improve the investment
climate.
Rule of law remains weak, but the government is taking steps to
improve the judicial system for foreign investors. The National
Arbitration Center offers businesses an alternative to Cambodias
corrupt court system.
Corruption remains the most problematic factor for investors in
Cambodia. Although the 2011 anti-corruption law remains largely
untested, some higher-level government officials, senior police officers,
and private sector officials have been arrested. The government
recently issued a list of fees for various government services
specifically under the departments of customs and taxation to help
companies avoid making informal payments that are illegal under the
anti-corruption law. The Council for the Development of Cambodia also
established a Complaints Desk as a vehicle for investors to report
corruption.
Nonetheless, Cambodias legal regime for investment is one of the
most liberal in Asia Pacific, with the only distinction between foreign
and local investors being the ability to own land. Even so, very long
term leases are possible. Recent government investments in
infrastructure aim to further accommodate foreign investors.
Development in Sihanoukville will improve seaport and airport
capacity, and discussions are underway to list the port on the stock
exchange.
An influx of investment in high tech manufacturing and food processing
is helping Cambodia diversify beyond the garment industry.
Considering the rising cost of doing business in China, Japanese and
Korean investors have relocated production bases to Cambodia,
particularly in high-tech manufacturing components and electric

motors industries. The high cost of power, however, continues to

present a challenge to energy intensive industries.

2.4.3. A comparison between the investment environment

of Vietnam and that of other countries in region
Compared to other countries in region, our investment environment
has some specific advantages in terms of stable political system,
cheap labor cost with higher competence. Thanks to these factors, in
many years, Vietnam has successfully attracted an increasing amount
of foreign capital. However, in long term, the policymakers should
weigh carefully the strengths and weaknesses of the investment
environment to improve and facilitate more foreign investment
projects.
Vietnamese investment environments competitive advantages come
from 5 factors:
Firstly, we have a stable political and societal environment. This is a
very fundamental criterion to meet the demand of foreign investors
about a favorable country where they can safely create lasting interest
and long-term profitable relationship. Take Thailand for an example.
Suffering from political crisis continuously from 2005 due to the conflict
between the Peoples Alliance for Democracy (yellow shirts) and the
Peoples Power Party governments (red shirts) in Bangkok, Thailands
investment environment has severely lost its appeal in foreign
investors with many indices showed a plunge in the investors
confidence. During that time, many foreign businesses have planned to
shut down their operations in Thailand and switch to Vietnam.
Secondly, Vietnam has a favorable geographical location. Asia Pacific is
a dynamic region with leading growth index in many years. Joining the
global trend of trade liberalization and regional customs harmonization,
since January 1st 1996, Vietnam has participated in AFTA (ASEAN Free
trade area) and performed CEPT (Common Effective Preferential Tariff).

This action has opened a new market of about 500 million people.
Moreover, having common borders with many Southern provinces of
China, Vietnam is an important link in the ASEAN China relationship in
some typical agreements such as EHP (Early Harvest Program).
Vietnam also plays a key role as a bridge of ASEAN East Asia (China,
South Korea and Japan) agreement.
Thirdly, Vietnam currently enjoys many benefits of golden population
structure. Over the last three decades, there have been dramatic
changes to Viet Nams population structure. The number of people
under the age of 15 has fallen substantially, while the number of
people of working age (15 to 64 years old) has increased. Because of
this, Viet Nam is now in a period known as the golden population
structure, which means that for every two people or more working,
there is only one dependent person. This demographic bonus provides
Viet Nam with a unique socio-economic development opportunity. With
the population of over 90 million (ranking 14 th globally), Vietnam is
evaluated as a potential country of the development of labor market.
In terms of human resources capacity, the quality of workers is
improved substantially and is currently above the level of national
economic development. Vietnamese people, especially young
generations can easily acquire new knowledge and technology as well
as adapt to the technology transfer activities with better foreign
language skills. According to the ranking of United Nations in 2014,
Vietnam stands at 121st position in terms of HDI (Human Development
Index). This ranking is quite low compared to other countries in region:
Country
Ranking in HDI
Singapore
9
Brunei Darussalam
30
Malaysia
62
Thailand
89
Indonesia
108
Philippines
117
Vietnam
121
Cambodia
136
Lao People's Democratic Republic
139
Myanmar
150
Source: Human Development Reports United Nations Development
Programme (Data in 2014)

Source: http://countryeconomy.com/hdi/vietnam
The wage cost for Vietnamese engineers is also more attractive to
foreign investors than other countries in the region: only 60% of
Chinas and Thailands, 18% of Singapores and 3% of Japans. The
labor cost for unskilled workers is also relatively cheaper:
Country
Average yearly wage of a factory
worker (USD/year)
Vietnam
1,266
China
1,992
Thailand
2,792
The same pattern can be seen for skilled and management-level
employees:
Country
Average yearly wage of a mediummanagement
employee
(USD/year)
Vietnam
8,897
China
8,653
Thailand
14,474
Fourthly, Vietnam has ample of natural resources including many
strategic energy sources such as crude oil, gas, together with hundreds
of agricultural and seafood. At present, Vietnam is among the leaders
in exporting of many different kinds of commodities.
Commodity
Ranking of Vietnam in exporting
Rice
3 (after Thailand and India)

Coffee
Cashew
Pepper
Frozen seafood
Tea

2 (after Brazil)
1
1
4 (after China, Norway, Thailand)
7 (after Sri Lanka, China, India,
Kenya, United Kingdom, Germany)
Source: http://www.mapsofworld.com/world-maps/top-coffee-exportingcountries.html
United States Department of Agriculture
FAOSTAT data, 2013 (last accessed by www.Top5ofAnything.com:
January 2014), FAOSTAT DATABASE 2011
http://www.statista.com/statistics/268269/top-10-exporting-countriesof-fish-and-fishery-products/
Last but not least, the market economy mechanism has been
established, developed and promoted in Vietnam recently towards
trade and investment liberalization. This creates a fair and cooperative
environment where businesses can compete and develop together. Up
to December 2013, there are 42 countries recognizing Vietnams
market economy status:
No.

Nations

Date of recognition

Angola

April 7, 2008

Argentina

April 17, 2010

Australia

February 27, 2009

Bangladesh

November 2, 2012

Belarus

May 17, 2010

Brunei

May 3, 2007

Cambodia

May 3, 2007

Chile

September 7, 2007

China

October 2004

10

Congo

October 29,2013

11

Germany

March 10, 2008

12

Iceland

July 3, 2012

13

India

October 25, 2009

14

Indonesia

May 3, 2007

15

Japan

October 30, 2011

16

Kazakhstan

November 1, 2011

17

Laos

May 3, 2007

18

Liechtenstein

July 3, 2012

19

Malaysia

May 3, 2007

20

Mongolia

November 21, 2013

21

Morocco

December 9, 2013

22

Mozambique

2010

23

Myanmar

May 3, 2007

24

Namibia

November 20, 2013

25

New Zealand

February 27, 2009

26

Nicaragua

27

Norway

July 3, 2012

28

Pakistan

August 29, 2012

29

Panama

2010

30

Peru

December 3, 2007

31

Philippines

May 3, 2007

32

Republic of Korea

November 16, 2009

33

Russia

July 6, 2007

34

Singapore

May 3, 2007

35

South Africa

May 24, 2007

36

Serbia

2013

37

Seychelles

2013

38

Sweden

July 3, 2012

39

Thailand

May 3, 2007

40

Ukraine

November 6, 2007

41

Uruguay

December 9, 2013

42
Venezuela
Source: http://news.chinhphu.vn/Home/More-nations-recognize-VN-asmarket-economy-in-2013/20142/20138.vgp
This list is going on, reflecting the efforts of Vietnamese governments
to commit a fair, transparent investment environment for both
domestic and international investors.
The process of financial and monetary reformation has also boosted
through banking system restructuring, flexible exchange-rate policy
adjusting,
tax
code
reforming
and
administrative-procedure
computerizing.
The policy to develop multi-sector economy has facilitated the optimal
development of businesses in all sectors with no differentiation in
treatment. This is the key factor to call for the maximum national
resources in order to achieve many long-term goals.
Regarding to production promotion policy, compared to other
countries, Vietnam has successively initiated many differences and
preferences to the benefit of businesses. For example, raw materials
were exempted from import tax in 9 months successively. According to
the circular No. 2/2014 of Ministry of Industry and Trade, starting from
February 7th 2014, agricultural raw materials are exempted from import

tax. In contrast, China has applied a tax rate of 17% for import and 9%
for export raw materials.
The diversified, multilateral foreign policy has opened great
opportunities to expand and develop foreign business of Vietnam. Up
to now, Vietnam has established economic - trade agreements with
more than 150 countries and territories. Vietnam is also an active
member in many regional and international trade organizations such as
ASEAN, ASEM, APEC and WTO. Not only that, Vietnam has signed many
bilateral agreements with the US, EU, Japan, China and Russian
Federation
The policy to attract foreign investors has also gradually completed
towards the maximum benefit of investors with no discrimination to
domestic investors. In terms of foreign investors, they also receive
many favors from the policymakers to encourage their long-term
interest and relationship with Vietnam. This is typically true after the
enactment of corporate law and investment law in 2005.
Accompanied 5 strong points, Vietnamese investment environment has
5 drawbacks that need addressing as soon as possible to attract more
new investors and maintain existing relationships:
Basically, Vietnam is still an agricultural country with limited
economies of scale. Our industrial capacity is still in the developing
process. The extent of modernization computerization is much lower
than that of other countries in the region. A lot of low-tech, outdated
methods are still in use. The economic structure has seen many
remarkable adjustments, but at a leisurely pace. Returns on
investments in some fields do not live up to the investors expectation.
According to the evaluations of many foreign investors, the economic
and social infrastructure of Vietnam has not satisfactorily met the
demand of development purposes. For example, Japanese investors
stated that the fiber Internet connection fee in Vietnam is much more
expensive than in other Asian countries. Supporting industry is much
weaker than other countries with the similar base of development such
as Thailand. Hence, our economy is not considered as developed
although for many successive years, we enjoyed a high growth rate,
only second to China.
The system of economic law is still in the process of finalizing. There
are actually some inequalities between businesses of different sectors.
Some pivotal industries such as electricity, telecommunication,
transportation, are still under monopolistic status, reflecting many

preferential treatments for state-owned corporations. Thus, it is quite

difficult for both domestic and foreign investors to predict the legal
consequences and regulations. Besides, it is undeniable that there are
some points in the system of legal documents should be reconsidered
and adjusted to harmonize with the international legal system.
The procedural reformation does not match with the rapid rate of
development of investment activities. To apply for a business license,
investors must comply with a bulky system of procedures and fulfil
many redundant fee obligations. Corruption is still commonplace and
has not completely prevented and settled.
The system of production factors markets, including capital market,
labor market, real estate, scientific-technology market has not
developed simultaneously and harmoniously. In fact, these markets can
be evaluated as under-developed compared to other countries in
region. Financial and banking services are not developed and are being
reformed but at modest pace and level. The banking system is
vulnerable due to high bad debt rates, interest rate risks and high
exchange rate, as well as low level of monitoring and managing. The
credit rating, despite some climbs recognized by Moodys recently
(government bonds credit rating is from B2 to B1), cannot be
evaluated as high.