New laws on business and investment recently came into force which provide a simpler procedure for foreign investors to acquire equity or invest in local enterprises. In order to maintain the attractive investment climate created by the new policies and the upward trajectory of the M&A real estate market – particularly in relation to foreign investors – the government must adhere to the commitments and spirit of the new laws.
Following the relaxation of the foreign investment procedures set out in the new Law on Investment and the Law on Enterprise, the government has relaxed the requirements for portfolio foreign investment and the privatisation of state-owned enterprises. While opening the door to foreign portfolio investment is attractive to foreign investors, it is unclear how restrictions imposed by other ministries will affect the government's plan to open up the market.
The new Law on the Organisation of People's Courts recently came into force. The law aims to provide a detailed explanation of the functions, duties and powers of the people's courts. Further, the law has introduced a new adjudicating level of people's court – the superior people's courts. The introduction of superior people's courts has altered the duties and powers of the other people's courts.
Foreign investors are highly appreciative of Vietnam for revising its Constitution in 2013, as the revision recognised foreign investors' right to do business and equal treatment between state-owned, private and foreign-invested enterprises. However, Vietnam must now decide whether it will open and liberalise its market and encourage its private sectors to engage worldwide. The decision is in the government's hands.
During the implementation and application of the Administrative Procedure Law, many issues arose in relation to the statute of limitations for initiating suits. To overcome these obstacles, the council of judges of the Supreme People's Court has issued a resolution which has fully secured complainants' right to complain and initiate suits in administrative cases.
Most foreign direct investment into Vietnam comes from Asian countries, the top three of which are Japan, Singapore and South Korea. This update provides an overview of foreign direct investment in Vietnam, including investment vehicles, information regarding restricted sectors and available tax incentive schemes.
Vietnam's biomedicine sector has attracted significant attention in recent years. The components of a biomedical industry are starting to come together and foreign investors are taking notice – in large part due to Vietnamese citizens living abroad who are returning to Vietnam to establish companies and conduct research. While Vietnam is still importing the majority of its biomedicine products, more innovations and investment are expected.
There has been a recent surge in the use of arbitration to resolve cross-border disputes in Vietnam. However, Vietnam's alternative dispute resolution regime has remained relatively quiet on the use of the 'arb-med' and 'med-arb' models – a fusion of adversarial and non-adversarial methods that affords flexibility to parties. It is hoped that more detailed provisions for these methods will be drafted.
Vietnam has recently become one of the favoured destinations for mergers and acquisitions for foreign investors. However, there are still obstacles and pitfalls, as there are in other emerging countries. This update discusses some of the major obstacles and pitfalls in the M&A process as well as solutions to overcome them in Vietnam's legal environment.
The Supreme Court recently issued an official letter instructing chief judges of the Provincial Level People's Court and equivalent courts to collect effective judgments based on a number of conditions and send them to the Supreme Court so that it can prepare a set of precedent cases. The precedent cases will then be submitted to the judges' council for approval.
Since the early 2000s, Vietnam's steady economic growth and ongoing efforts to reform its legal system have provided encouraging signs of the development of a thriving M&A marketplace. Not only have a number of key transactions been internationally recognised, but 2014 also saw a number of legal developments which are expected to generate many more opportunities for foreign investment in Vietnam's dynamic economy.
The new Law on Tendering is expected to afford greater equality among local tender participants, but its promotion of local players in the drug market at the expense of foreign players has caused concern. Together with the already stringent restrictions against foreign pharmaceutical players, the law paves the way for an environment that fosters an almost monopolistic position for domestic pharmaceutical companies.
The State Bank of Vietnam (SBV) has set new limits on spot, swap and forward transactions. In respect of US dollars, the buy/sell rates set by banks may not exceed 0.25% of the average interbank foreign exchange rate announced by the SBV for the previous transaction day. Banks are free to decide the buy/sell rates in respect of other foreign currencies.
The governor of the State Bank of Vietnam issued Decision 546/2002/QD-NHNN to allow credit institutions freely to agree dong lending rates with their customers. Previously, credit institutions had to set lending rates based on the monthly basic interest rate stipulated by the State Bank of Vietnam.
The State Bank of Vietnam has issued a new decision announcing a new basic rate that credit institutions must use to determine their dong lending rates to customers.
A recent decision amends the percentage of foreign currency that organizations are mandated to sell to banks. Certain individuals and entities must immediately sell at least 30% of foreign currency gained from so-called 'vang lai' (broadly non-capital) incomes to designated banks in Vietnam.
Under Vietnamese banking law, the provision of syndicated loans or co-guarantees by credit institutions is referred to as a 'co-financing' transaction. The State Bank of Vietnam (SBV) has issued new regulations on co-financing through Decision 286, which suggests that a co-financing transaction may take the form of a single loan or bank guarantee.
The State Bank of Vietnam has intervened to alleviate the concerns of foreign investors by issuing Decision 218/2002/QD-NHNN, which introduces a mechanism allowing qualified 'highly important' projects to convert dong revenue into US dollars and to gain access to US dollars when they cannot be obtained from commercial banks.
The State Bank of Vietnam recently issued Decision 269/2002/QD-NHNN promulgating rules concerning cash and valuable assets and papers, including how they should be managed, kept and transported.
To date, seven banks (including the State Bank of Vietnam (SBV) and state owned and joint stock banks) have participated in the interbank electronic payment system. The SBV expects this number to increase in the near future.