Channels to do invest in Vietnam
Exporting is one of the quickest and easiest ways to enter a foreign market. It contains indirect and direct export.
Indirect exporting involves the seller working through an independent international intermediary. This is less expensive as it does not require an overseas entity or network. This also takes less risk as the international marketing intermediaries offer their services for the company, and therefore the seller will make fewer mistakes.
Directing exporting involves the seller handing their own exports and is required to establish an overseas network.
However, exporting is depended on local distributors and clients, faces to fluctuation of exchanged rates.
2. Investment by cooperate with local company to supply goods and services in Vietnam (Licensing, Franchising)
Foreign investors are able to sell licenses to Vietnamese companies to use intellectual property, brand, design or business programs. In this arrangement, the licensing company may exercise control over how its IP is used but does not control the business operation of the licensee. The licensor will receive royalties in exchange.
Foreign investors are able to invest in Vietnam by commercial franchise, which involved in technology transfer, trademark of goods or others. The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee.
The franchisors must also consider the certain conditions before registering their activities: The franchise network is required to operate for at least one year.
Without a certificate of franchise registration as carrying out franchise activities or given non-satisfied the conditions of commercial franchise, franchisors would face administrative sanctions, including fines up to VND 10 million (USD 438).
3. Investment by contributing capital, buying shares or buying capital contribution of business organization
- Buy shares of joint-stock companies through IPOs or additional issuance;
- Contribute capitals to limited liability companies and partnerships;
- Contribute capital to other business organizations
Buying shares or capital contributions of business organizations:
- Buy shares of joint-stock companies from the companies or their shareholders;
- Buy capital contributions to limited liability companies by their members and become members of limited liability companies;
- Buy capital contributions to partnerships by partners and become partners
- Buy capital contributions to business organizations from other members.
Given investor owning a small amount of capital contributions, or shares does not have the power to participate in operating and financial policy decisions of the business. Such cases are considered as a normal investment.
Given investor owning a significant amount of capital contributions, or shares would take over rights to control and manage activities of the business. It could be considered as merger and acquisition (M & A). While establishing a new business may be over cumbersome, M & A is a better substitute as it enables investors not only to save time, costs to implement complicated administrative procedures but also make use of existing access to customer, location and distribution channels.
It is notable that if the acquirer has 30% – 50% of the market share, legal representatives of the companies shall notify the competition authority before initiating the acquisition process, unless otherwise prescribed by the Law on competition. Acquisition is prohibited if the acquirer has more than 50% of the market share after acquisition, unless otherwise prescribed by the Law on Competition
4. Set up a business
Foreign investors are authorized to establish business organization in Vietnam. Before establishing a business organization, the foreign investor must have an investment project, apply for a Certificate of investment registration, and satisfy certain conditions under Law on investment.
Foreign investors may own an indefinite amount of charter capital invested in business organizations, except for the case required by legal.
Advantage as setting up a business:
- Establish a separate legal entity and enjoy the limited liability
- Both individual and corporate founders are allowed
- Conduct commercial activities and earn turnover
- Clear corporate structure to ensure investors control over the company
Legal forms of corporation for business entities:
5. Investment under PPP (Public private partnership) contracts
A contract between a regulatory agency and an investor, a project enterprise to carry out, manage and operate an infrastructure and public service project.
- “Build – Operate – Transfer contract” (BOT contract): after completing the construction, the investor shall be entitled to operate it for a specified period of time; eventually, the investor shall transfer it to the regulatory agency.
- “Build – Transfer – Operate contract” (BTO contract): after completing the construction, the investor shall transfer it to the regulatory agency, and shall be entitled to operate it for an agreed period of time.
- “Build – Transfer contract” (BT contract): after completing the construction, the investor shall transfer it to the regulatory agency, and then the investor will be allotted a land parcel used for carrying out another project.
- “Build – Own – Operate contract” (BOO contract): after completing the construction, the investor shall take ownership of this project and have the right to operate it for a specified period of time.
- The Build – Transfer – Lease contract (BTL contract): after completing the construction, the investor shall transfer it to the regulatory agency and shall be entitled to provide services on the basis of operation of such project for a specified period of time; the regulatory agency shall have the authority to lease and make payment for the investor’s services.
“Build – Lease – Transfer contract” (BLT contract): after completing the construction, the investor shall have the right to provide services on the basis of operation of such projector a specified period of time; the regulatory agency shall have the authority to lease and make payment for the investor’s services; when the lease term expires, such project shall be transferred to the regulatory agency.
- “Operation & Management contract” (O&M contract): means a type of contract to operate the project between a regulatory agency and an investor for a specified period of time.
The equity capital of the investor shall account for at least 20% of the total capital (Total investment of over VND 1,500 billion).
With regard to the project funded by total investment of over VND 1,500 billion:
- For the investment capital that amounts to VND 1,500 billion, the equity capital shall account format least 20% of such financing portion.
- For the investment capital that exceeds VND 1,500 billion, the equity capital shall account for at least 10% of such financing portion.
6. Investment under BCC (Business Cooperation Contract) contracts
The investment form based on contract between domestic investors and foreign investors for business cooperation, profit and product distribution without establishing an economic organization. The parties are flexible, quite independent as decide projects’ issues, rights and responsibilities among the parties.
Foreign investors under a business cooperation contract is allowed to establish an operating office in Vietnam to execute the contract.
7. Establish representative offices (RO) and Branch
8. Securities investing activities of foreign investors
Vietnam Stock market contains 02 stock exchange including HOSE- Ho Chi Minh Stock Exchange, HNX- Hanoi Stock Exchange.
Find a Vietnamese Stock Brokerage firm
Finding a brokerage firm is necessary to navigate the forms and documents required to begin trading stocks.
Top 10 biggest stock brokerage firms are listed below.
Open a trading securities account
In order to begin trading stocks, foreign investors are required to have a trading account which is compulsory opened in one of Depository member of (VSD) Vietnam Securities Depository’s member list.
9. Investing on real estate in Vietnam
Scope of real estate trading conducted by foreign-invested enterprises:
- Leasing houses or erection works for sub-lease;
- Building houses for lease on land leased by the State; building houses or erection works other than houses on such land for sale, lease or hire-purchase;
- Receiving the whole or part of a real estate project transferred from the project owner to build houses or erection works for sale, lease or hire-purchase;
- Building houses for sale, lease or hire-purchase on land allocated by the State;
- Building buildings works for commercial operation in line with land use purposes, on leased land in industrial parks, industrial complexes, export-processing zones, hi-tech zones, or economic zone.
Requirements to conduct real estate trading
- Set up an enterprise, and having legal capital VND 20 billion (USD 0.9 million) and more
- Investors conduct small-scale or irregular transactions regarding to real estate shall not be required to set up enterprises, but are required to make tax declaration
Restrictions for foreign investors
- Buy, rent and purchase, receive, inherit and own less than 30% of apartments in an apartment building; or less than 250 houses regarding separate houses including villas, row houses in an area whose population is equivalent to a ward-administrative division.
- The maximum homeownership time: 50 years.