FDI enterprises investing in Vietnam are subject not only to domestic laws but also to international commitments to which Vietnam is a signatory. Understanding these commitments is key to minimizing legal risks and seizing investment opportunities. DNP Vietnam Law Firm will provide FDI enterprises with detailed insights on this matter.
1. Commitments under the WTO Framework:
When Vietnam became an official member of the WTO in 2017, the country made numerous commitments to fulfill obligations related to investment, particularly through agreements such as:
- The General Agreement on Trade in Services (GATS);
- The Agreement on Trade-Related Investment Measures (TRIMS);
[…]
1.1 Positive Impacts of GATS on FDI Activities:
GATS has facilitated Vietnam’s opening of its service market to foreign investors. Specifically, Vietnam committed to liberalize 11 out of 12 basic service sectors in the WTO, including key fields such as:
- Distribution (wholesale, retail): Allowed 100% foreign-owned enterprises after 3 years of WTO accession.
- Financial services (banking, insurance): Permitted foreign banks and insurance firms to establish independent legal entities in Vietnam.
- Telecommunications: Committed to increase foreign ownership up to 65% in value-added telecom services without network infrastructure.
- Education, environment, and healthcare: Conditionally open with ownership caps ranging from 49% to 70%.
Examples of major global corporations utilizing these commitments include Samsung (electronics), Toyota (automotive), HSBC and Prudential (finance & insurance), all of which have successfully expanded their operations in Vietnam.
1.2 Positive Impacts of TRIMS on FDI Activities:
- Transparency and investment liberalization: FDI enterprises are no longer subject to deep state intervention in production processes. For example, requirements to use local materials or meet export ratios for incentives are no longer enforced.
- Fair competition aligned with global supply chains: FDI enterprises are free to source materials for production without having to obtain prior approval from competent authorities.
- Reduced legal risks: Compliance with TRIMS means investors are not forced into unfavorable local supply contracts or bound by non-market-based incentives.
- Incentives linked to sectors and locations: After TRIMS, investment incentives are based on business sectors or geographical areas rather than trade-related conditions.
2. Commitments in Free Trade Agreements (FTAs):
2.1 Notable FTAs:
Vietnam is a member of over 15 FTAs, including prominent ones such as:
- CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership)
- EVFTA (EU-Vietnam Free Trade Agreement)
- RCEP (Regional Comprehensive Economic Partnership)
[…]
2.2 Positive Impacts of FTAs on FDI Enterprises:
- Market expansion and tariff incentives: FTAs help reduce costs for FDI enterprises by eliminating 90–99% of import tariffs over time.
- Market access and ownership commitments: Agreements such as EVFTA and CPTPP provide clear regulations on sectors and ownership ratios, assisting FDI enterprises in investment planning.
- Removal of tariff barriers: Preferential tariffs and rules of origin provide opportunities for both domestic and foreign enterprises.
- Legal reform for implementation: Vietnam must review and revise its laws to enforce FTA commitments, thus fostering a favorable investment environment.
3. Bilateral Investment Treaties (BITs):
3.1 Commitment Content:
Vietnam has signed more than 60 BITs with various countries and territories, providing legal reassurance for long-term FDI.
Key BIT commitments include:
- Encouraging investment in key economic sectors;
- Ensuring non-discrimination (National Treatment and Most Favored Nation principles);
- Prohibiting expropriation or nationalization of lawful foreign investor assets;
- Applying the most favorable provisions when multiple treaties or laws exist.
3.2 Positive Impacts on FDI Enterprises:
- Enhanced legal protection: BITs help investors avoid expropriation, nationalization, or discriminatory treatment.
- Stable investment environment: Legal and policy frameworks are less likely to change unexpectedly to the detriment of investors.
Transparent dispute resolution mechanisms: Enterprises may bring claims against the government before international arbitration (ISDS), bypassing domestic courts. - Increased long-term security and credibility: BITs serve as a legal “shield,” promoting sustainable investments.
- Competitive advantages: Investors from countries with BITs with Vietnam enjoy more benefits compared to others.
4. Challenges and Difficulties of These Commitments for FDI Enterprises:
- Intense competition: Domestic firms must compete directly with foreign conglomerates with substantial resources.
- High standards: Products must meet stringent quality, technical, and hygiene standards.
- Limited resources: Enterprises may lack the personnel and technology needed to leverage FTA opportunities.
- Legal risks: While the government facilitates FDI business and production activities, all actions must comply with the law. Any violations are subject to legal sanctions.
The image is designed by DNP Viet Nam Law Firm.
5. Conclusion:
International commitments help Vietnam attract FDI and expand its market while imposing higher demands on transparency, technical standards, environmental protection, and legal compliance. FDI enterprises must fully understand and comply with these commitments to capitalize on opportunities, reduce risks, and achieve sustainable growth in Vietnam.
The information above is for reference only. If you require further details, please contact us using the information below.
=====================================
DNP VIET NAM LAW FIRM
Contact:
🏢 Address: 5th Floor, 52 Nguyen Thi Nhung Street, Van Phuc estate, Hiep Binh Phuoc, Thu Duc City, Ho Chi Minh City, Viet Nam.
📩 Email: info@dnp-law.com.
📞 Hotline: 0987 290 273 (Đinh Văn Tuấn Lawyer).
Website: https://www.dnp-law.com/
