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Environment
Business environment
Vietnam promulgated its first Law on Foreign Investment in 1987. In 1994, diplomatic relations with the United States resumed. In 1995, Vietnam was admitted into the Association of Southeast Asian Nations and was accorded favored-nation trading status by the European Union. In 2001 a Bilateral Trade Agreement with the United States took effect. Vietnam became a permanent member of the WTO on 7 January 2007.

There are almost over 14,000 active foreign investment projects licensed in Vietnam, and despite the global financial crisis, its GDP has grown in recent years. Growth in 2010 was 6.78 percent and 6.3 percent for 2011. Over the past decade, Vietnam has averaged GDP growth of 7.5 percent a year.

Vietnam is an attractive investment destination to foreign companies for many reasons. It has a substantial population (over 87 million people), with the majority below the age of 30, presenting a tremendous domestic market for goods and services. The country also enjoys a very high literacy rate of over 90 percent.

In addition, the Vietnamese Government provides investment incentives to foreign investors in certain industries and where investment is undertaken in low socioeconomic regions. The industries include certain areas of technology, biotechnology, education, infrastructure, and agriculture. Incentives are also available for investment in industrial zones, high tech zones, export processing zones, and economic zones. Incentives can include long term low tax rates, import tax, VAT, corporate income tax (CIT) and personal income tax (PIT) concessions, and concessions for land use fees and rent.

Currency
The Vietnamese Dong (VND) is the national currency of Vietnam. The Dong is not freely convertible in the international money market. The exchange rate between Dong and United States Dollars is set daily by the State Bank of Vietnam (SBV), the Vietnam central bank, and has been devalued four times since 2009.

United States Dollars are still widely used in the economy, despite the SBV’s regulations on the circumstances in which they may be used in trade and business. It is common for those dealing in foreign exchange to offer better rates for buying US dollars than the maximum authorized rate.

Competition
Monopolies exist in certain sectors, such as electricity supply and the supply of aviation fuel. In other sectors such as oil distribution, SOEs dominate the market. Monopolies and market domination are not prohibited in Vietnam. Competition is increasing although there are occasions when the need to protect SOEs or Vietnamese companies leads to obstacles arising when foreign investors try to introduce competition.

The Competition Law 2004 (Competition Law) deals with the restraint of competition, abuse of dominant market position, economic concentration and other “unhealthy” anti-competitive practices. It also sets out procedures for the resolution of anti-competition cases and measures for dealing with breaches of the Competition Law.

The Competition Law applies to organizations and individuals conducting business in Vietnam, including enterprises engaged in the production or supply of public utility products or services, State monopolies and industry associations.

Price control
Rates for utilities (for example, electricity, water and fuel) are set by the Vietnamese authorities. Prices of certain key commodities are regulated by the Vietnamese Government.

Re-organization of State-owned enterprises (SOEs) The Government has pursued a policy of selling interests in SOEs through a process known as equalization. This normally involves the allotment of parcels of shares to long-term strategic investors and to employees. A minority of shares may be issued on the stock exchange, although the Government maintains a majority shareholding.

Under the EL, SOEs were obliged to be equitized by 1 July 2010. While many small SOEs have now been equitized, most of them (more than 1,300) have not been.

Rules governing equalization include that:
  • the sale of shares to strategic investors (up to three) and other investors must not be less than 25 percent of the charter capital of the relevant enterprise
  • the sale of shares to other investors must not be less than 50 percent of the 25 percent referred to
  • with respect to enterprises on a large scale with State owned capital above 500 billion VND or conducting business in specialized sectors and industries (insurance, banking, posts and telecommunications, aviation, rare mineral exploitation), the ratio of shares auctioned to investors must be considered and specifically decided upon by the Prime Minister or competent authority authorized by the Prime Minister.