In the context of Vietnam’s ongoing legal and technical reforms aimed at enhancing the quality of its investment environment, several new regulations have been promulgated and implemented, directly affecting the operation of foreign direct investment (FDI) enterprises.
The following article by DNP Viet Nam Law Firm analyzes key legal developments, evaluates the associated opportunities and challenges, and offers legal recommendations from a practitioner’s perspective to assist FDI enterprises in adapting to and optimizing their business strategies in Vietnam.
1. Overview of the Investment Environment in Vietnam
Vietnam’s investment environment encompasses legal and regulatory frameworks, policy incentives, infrastructure, human resources, and transparency in state administration. In recent years, the Government of Vietnam has continuously improved investment conditions through the promulgation and amendment of core legal instruments such as the Law on Investment, the Law on Enterprises, and various sectoral and regional incentive policies.
Furthermore, the Government has promoted administrative reform, digital transformation, and the adoption of environmental, social, and governance (ESG) standards to enhance the appeal of FDI inflows and improve the overall quality of capital attraction.
2. Notable Legal Developments Affecting the Investment Environment
2.1. Amendments to the Law on Investment (2020) and Implementing Decrees
The Law on Investment 2020 (effective as of 1 January 2021) introduces a revised list of sectors and industries subject to investment restrictions and incentives. Currently, preferential treatment is extended to projects in the following sectors: high technology, clean technology, supporting industries, renewable energy, high-tech agriculture, education and training, and high-quality healthcare.
In particular, Articles 16, 20, and 21 of the Law on Investment 2020 stipulate that FDI enterprises may enjoy investment incentives provided they satisfy conditions regarding location, capital scale, industry sector, or special forms of investment such as innovation centers or centralized IT zones.
Key legal instruments:
Law on Investment 2020
Decree No. 31/2021/ND-CP guiding the implementation of the Law on Investment
2.2. ESG Requirements and Green Transition Commitments
Following Vietnam’s commitments post-COP26 to achieve carbon neutrality by 2050, the Government has adopted a regulatory framework oriented toward sustainable development, energy transition, and environmental protection.
FDI enterprises are now required to comply with ESG standards, particularly in relation to environmental impact assessments (EIAs), renewable energy usage, and the disclosure of sustainability-related information. The Government has mandated approximately 2,000 enterprises to report greenhouse gas emissions and develop roadmaps for emission reductions.
Key legal instruments:
Law on Environmental Protection 2020
Decree No. 08/2022/ND-CP
2.3. Tightening Control over Foreign Investment via Capital Contribution and Share Acquisition
Indirect investment forms, such as capital contributions and share acquisitions, are increasingly popular, especially in sectors involving high technology, digital services, and global supply chains. However, such investments pose potential risks to national security, personal data protection, and core technologies, prompting the Government to adopt stricter regulatory measures.
Pursuant to Articles 26 and 27 of the Law on Investment 2020, foreign investors engaging in capital contributions or share purchases must notify or register with competent authorities, particularly when such transactions result in ownership of 50% or more of the charter capital or confer significant decision-making power over the enterprise.
Notably, Articles 15 and 16 of Decree No. 31/2021/ND-CP elaborate on sectors and industries where foreign investment is restricted or subject to specific conditions. Sensitive areas include national defense and security, big data, artificial intelligence (AI), telecommunications infrastructure, and core technologies.
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2.4. Acceleration of Investment Procedure Digitalization:
A positive development in recent years is the application of the National Investment Information Portal (https://fdi.gov.vn), enabling foreign investors to submit applications and monitor the administrative procedure progress more efficiently and transparently, thereby reducing compliance costs and improving IT infrastructure.
This centralized digital platform supports foreign investors throughout the entire lifecycle of an investment project, including: Investment Registration (issuance of the Investment Registration Certificate), Project Amendment, Project Transfer, and Project Termination.
Key features: 24/7 online submission and tracking of applications, receipt of administrative results via account or email, and integration with the National Public Service Portal.
Legal References:
Decree No. 31/2021/ND-CP
National Digital Transformation Program under Decision No. 749/QD-TTg dated 03 June 2020
Decision No. 06/QD-TTg dated 06 January 2022 on the approval of the Scheme for Developing Population Data Application, Digital Identity and Authentication for National Digital Transformation and the Development of a Digital Government.
3. Opportunities and Risks for Foreign-Invested Enterprises (FDIs):
3.1. Positive Impacts on FDIs:
Opportunities for Expansion in High-Tech and Green Transition Sectors: Vietnam prioritizes investment attraction in high-tech sectors, innovation, smart manufacturing, information technology, and renewable energy. This creates substantial opportunities for multinational corporations seeking to expand sustainable supply chains across Asia.
A More Transparent and Investor-Friendly Legal Environment: The government is streamlining investment procedures through digital one-stop platforms, thereby shortening licensing timeframes and reducing administrative burdens. This assists FDIs in lowering compliance costs and mitigating legal risks.
Legal References:
Law on Investment 2020
Decree No. 31/2021/ND-CP
Decision No. 06/QD-TTg (2022) on the Development of a Digital Government and the National Public Service Portal
3.2. Legal and Operational Risks for FDIs:
Increased Compliance Costs Arising from ESG and Environmental Regulations: New regulations concerning environmental protection, emission reduction, waste management, life cycle assessment, and sustainability reporting may significantly increase initial investment and operational costs, particularly in industrial manufacturing, textile, and electronics sectors.
Stricter Control over Investments Involving National Security and Personal Data: FDIs operating in sensitive sectors such as fintech, data management, IT, and d igital infrastructure are now subject to security clearance by the Ministry of Public Security or Ministry of National Defense during capital contributions or share acquisitions, potentially prolonging approval processes and increasing due diligence requirements.
Legal References:
Article 26, Law on Investment 2020
Decree No. 53/2022/ND-CP guiding the implementation of the Cybersecurity Law
Lack of Uniformity Across Local Authorities: Despite ongoing reforms, there remains a gap between central policy enthusiasm and local implementation. Regulations may appear liberal at the national level but are inconsistently applied at provincial or district levels, resulting in procedural delays or inconsistent documentary requirements.
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