Under the new Investment Law 2020, which will take effect on 1 January 2021 (“New Investment Law”), the most notable change is the introduction of the “negative list” approach, according to which foreign investors will be entitled to market access conditions applicable to domestic investors for any sectors not included in the list of sectors, which foreign investors are restricted from accessing (“List of Restricted Sectors“).
The government recently released a draft regulation that guides market access by foreign investors and provides the List of Restricted Sectors applicable to the foreign investors, which is to be included in the decree guiding the implementation of New Investment Law (“Draft Decree”).
- List of Restricted Sectors
The Draft Decree provides the List of Restricted Sectors detailing: (i) the sectors where market access is not yet allowed; and (ii) the sectors where market access is conditional. The List of Restricted Sectors is attached in the appendix of this client alert.
- Application of the List of Restricted Sectors
The Draft Decree also provides that the List of Restricted Sectors is applicable to foreign investors and foreign foreign-invested economic organizations in the following cases, when they make investments by way of establishing a new economic organization, acquiring shares and capital contribution in an existing entity, or entering into business cooperation contracts:
- Having foreign investors holding more than 50% of the charter capital, or having the majority of the partners being are foreign individuals if the business organization is a partnership (“Foreign Majority Entity”);
- Having the Foreign Majority Entity holding more than 50% of the charter capital;
- Having foreign investors and the Foreign Majority Entity holding more than 50% of charter capital.
- Principles of applying the List of Restricted Sectors
- Foreign investors will be entitled to market access conditions applicable to domestic investors for any sectors not included in the List of Restricted Sectors.
- Foreign investors conducting investment activities in different sectors must satisfy all market access conditions applicable to those sectors.
- The business lines for which Vietnam has not yet committed to national treatment according to international treaties of investment and Vietnamese laws do not have provisions on restrictions applicable to foreign investors, the foreign investors are able to apply the market access conditions as prescribed for domestic investors.
- In cases where foreign investors are subject to international treaties and the market access conditions applied for such foreign investors are more favorable than that of Vietnamese law, then the foreign investors are allowed to apply the market access conditions of the international treaty.
- For foreign investors who are subject to the application of different international treaties with different regulations about the market access conditions in the same business line, such foreign investors are able to choose to apply the conditions according to one of the treaties, except where the relevant international treaties provide otherwise.
List of Restricted Sectors
A. List of sectors where market access is not yet allowed
- Trading in goods and services that fall under the list of goods and services subject to state monopoly
- Press activities and activities on gathering news, broadcasting and television in any form
- Investigation and security services
- Judicial administrative services, including judicial verification services, bailiff services, property auction services, notarization services and asset management services
- Services of sending workers abroad
- Business in cemeteries and cemetery parks
- Public opinion polling services (opinion polls) (CPC 86402)
- Blasting services
- Testing and certification services for transportation vehicles
- Importing and dismantling of used ships
B. Sectors where market access is conditional
- Production and distribution of cultural products, including video records
- Production, distribution and projection of television programs and cinematographic works
- Radio and television
- Insurance, banking, brokerage, securities trading, monetary and other related services
- Telecommunication services
- Advertising services
- Print services, publication distribution services
- Land surveying and mapping
- Educational services
- Exploration, exploitation and processing of natural resources, minerals, oil and gas
- Hydroelectric and nuclear energy
- Passenger transportation and freight transportation by railroad, airway, road, river, sea and pipeline
- Forestry and hunting
- Betting business, casino
- Services related to industrial property
- Guard services
- Manufacture of military materials or equipment
- Operation and management of river ports, seaports and airports
- Real estate business
- Legal services
- Veterinary services
- Distribution services
- Technical inspection and analysis services
- Travel services
- Health and social services
- Sporting and recreational services
- Manufacture of paper
- Manufacture of transportation vehicles having more than 29 seats
- Development and operation of traditional markets
- Commodity trading exchange
- Service of collecting inland retail goods
- Auditing, accounting, bookkeeping and tax services
- Valuation services, consulting services of valuating enterprises for equitization
- Services related to agriculture, forestry and fishery
- Manufacture of aircraft
- Manufacture of locomotives and railroad carriages
- Manufacture of cigarettes
- New business lines that do not exist in the territory of Vietnam at the time the Investment Law becomes effective