Overview of FDI and Economic Performance in 2001

Thanks to the amendments of the Foreign Investment Law in 2000, a streamlining of procedures and further administrative reforms at both central and local levels, and a revival of South East Asia and other Asian countries, foreign investor interest and confidence in the country have revived. FDI inflows into Vietnam has picked up since the end of 2000 and experienced a promising rise in 2001. According to the official figures released by the Ministry of Planning and Investment (MPI) at the year-end, foreign investment into Vietnam rose to $3.01 billion in 2001, an increase 26% year-on-year increase. There are totally 460 new projects licensed in 2001 worth $2.436 billion, up 22.6% against the previous year. Most licensed projects were reportedly operating effectively and 210 existing projects increased their investment capital during the year, with a total of $580 million. As of the end of 2001, foreign invested enterprises (FIEs) account for over 30% of industrial output, 25% of the country’s capital stock, 12% of GDP, 7 % of tax receipts and with over 350,000 jobs. Vietnam now has 68 industrial parks, EPZs and high-tech zones covering 11,000 hectares in total, excluding 14,000 hectares in Dung Quat Industrial Park, of which leases had been taken out for 35% of the available land.

The last year also saw a relatively high GDP growth at 6.8% though short of the Government target of 7.5% due to a slowdown in export growth. The economic growth of the country in 2001 was viewed as stable and satisfactory and the country is expected to target growth of 7-7.3% in 2002. The General Department of Statistics revealed that Vietnam’s exports for the year 2001 rose 4.5% year-on-year, below the target set by the Government. The export earnings for the year reached $15.1 billion lower than the initially projected $16.3. Investment from state-owned enterprises reached VND25,000 billion ($1.6 billion), up 14% on the previous year, and private sectors invested VND36,000 billion ($2.4 billion), an increase of 26%. With the introduction of the Enterprise Law two years ago, the private sector has developed very fast. Since the launch of the Enterprise Law to date, 18,000 private businesses have been set up with a combined investment of VND22,000 billion ($1.46 billion).

In an annual meeting with the Government representatives in December 2001, international investors acknowledged that Vietnam was a politically stable country and could be regarded as a safe harbour for foreign investors in a turbulent global economy. The observers also share the view that the country’s economy will move further forward this year with the momentum it retains from 2001.

Major Legislation Developments Affecting FDI in the Country in 2001

After the initial success and sharp rise in FDI flows into the country during the early 1990s, the growth of FDI fell sharply during 1997-1999. This is largely attributed to slow further reforms in Vietnam that did not meet foreign investors’ expectation and partly due to the regional financial crises that much affected the largest investors such as Japan, Singapore, Taiwan, South Korea and Hong Kong to pour FDI capital into the country. The most concerns of foreign investors are post-licensed bureaucratic hurdles and high cost of doing business in the context of falling costs in other countries in the region, especially China. To raise the country’s competitiveness and attractiveness to international investors, the Government of Vietnam has undertaken a series of measures including administrative reforms, SOEs restructuring, banking reform, and so on to create a better environment for businesses in general and FIEs in particular. Of the measures taken by the Government, further improvement for the legal framework for FDI is the important task. This started from the introduction of the Prime Minister’s No. 53/1999/QD-TTg announcing measures for encouragement and guarantee of FDI in Vietnam effective from 1 July 1999 ("Decision 53"). Various positive policies and measures were introduced under Decision 53, which were welcomed by foreign investors. Specific legal instruments have been issued for the implementation of Decision 53, of which the most important one was the revised Foreign Investment Law of 9 June 2000 by the National Assembly which took effect as of 1 July 2000 and produced major changes to the Foreign Investment Law in 1996. The revised Law was followed by Government Decree No. 24/2000/ND-CP dated 31 July 2000 and Circular No. 12/2000/TT-BKH of the MPI, which addressed quite a few concerns of foreign investors. Other implementing regulations include some circulars issued by concerned ministries and agencies, such as Circular No. 13/2000/TT-BTC of the Ministry of Finance on tax regulations; Circular No. 22/TT-BTM of the Ministry of Trade on import-export issues; Circular No. 06/2000/TT-TCHQ of the General Department of Customs on customs formalities; Circular No. 16/2000/TT-BXD of the Ministry of Construction on construction management.

To reaffirm the country’s commitment to FDI and to continue creating favorable conditions for the development of foreign investment sector1, Vietnam has taken further efforts in 2001 to perfect its legal framework for foreign investment. The year 2001 witnessed a spate of rules and regulations which provided further clarifications and eased concerns of foreign investors regarding doing business in the country. The following will review major legal developments that have taken place in 2001, which partly contributed to the revival of foreign investment in the country and signaled a further growth in the upcoming years.

New FDI Policies 2001-2005

The Government of Vietnam issued on August 28, 2001 Resolution No. 09/2001/NQ-CP for attracting and promoting the efficiency of foreign direct investment in the period of 2001-2005, and then the Prime Minister issued Directive No. 19/2001/CT-TTg guiding Resolution 09. The Resolution maps out major policies and measures that will be taken to promote FDI in the period. According to this Resolution, during the period, the Government sets a target to attract about US$12 billion of newly registered capital of FDI projects in the country, of which the realized capital is expected to reach US$11 billion. By the year 2005, the FDI sector will account for 15% of GDP, 25% of the country’s exports and 10% of the budget revenue (excluding oil & gas projects). Various policies and measures for furthering policy, legal and administrative reforms, FDI promotion, human resources training, etc. will be taken by the Government. The Resolution shows the Government’s preference for FDI in selected sectors such as exports, agriculture and rural development, IT, telecommunications, and production and development of socio-economic infrastructure and in less developed geographical areas in the country and industrial zones already built and under construction.

Relevant ministries and agencies are assigned the tasks by the Prime Minister under Directive 19 to implement major solutions for attracting FDI in the period. Lists of national and provincial projects calling for FDI will be published. Most importantly, the Resolution calls for continued legal system for FDI, establishment of a level playing field for both domestic and foreign investors, facilitation of foreign ownership in SOEs, expansion of business sectors open to FDI such as import services and local distribution, real estate market, issuance of regulations for FIEs to convert to shareholding companies and list on the securities market. The Resolution also calls for facilitation of purchase of residential houses by overseas Vietnamese and the continuation of establishing the single pricing system for both local businesses and FIEs. In addition, steps will be taken to abolish the forced foreign exchange surrender, to simplify and streamline tax system for creating a common tax system for both domestic and foreign investors, to offer more tax incentives for FDI in selected sectors, and to limit the State authorities interference in FIEs’ business. It also asks for removal of difficulties and problems in land and site clearance, labor recruitment, etc.

Towards Single Pricing System

Despite the consistent efforts of the Government to reduce the cost of doing business in the country and phase out the dual pricing between domestic and foreign businesses, starting from Decision No. No. 53/1999/QD-TTg of the Government, the country remains expensive compared with other countries in the regions. In May 2001, the Government Pricing Committee submitted a plan entitled "Orienting the Pricing Policies towards FDI Enterprises and Foreigners from 2001 to 2005" to establish a single pricing system for foreigners and locals, which has been approved by the Prime Minister. To name some actual moves, effective mid-August 2001, overseas Vietnamese were entitled to local rates for all services; railway prices were also unified. Starting from 1 January 2002, the price of airfares for foreigners was reduced, while those for local and Vietnamese overseas saw an increase. Telecommunications charges have been reduced by 15% commencing from 1 December 2001, which reduction was the ninth time in eight years and the second time in 2001. It is hoped that by the year 2003, a comprehensive single pricing system will be established to eliminate the still discrimination between local and foreigners.

Banking and Foreign Exchange

The most important regulation on foreign exchange control, i.e. Decree No. 63/1998/ND-CP dated 17 August 1998 was revised in January 2001. Of note, the right to purchase foreign currency has been extended to a broad range of organizations operating in Vietnam, including FIEs. To detail the revised Decree 63, the Government issued Decision No. 61/2001/QD-TTg dated 25 April 2001 on obligations to sell and rights to purchase foreign currency of residents being organizations. Decision 61 became effective as of 10 May 2001 and replaced Decision No. 173/1998/QD-TTg of the Government dated 12 September 1998. According to Decision No. 61, effective 10 May 2001, all FIEs and foreign parties to BCCs (along with foreign company branches and foreign contractors) shall be subject to a new foreign exchange surrender rate of 40%, down from 50% under Decision 173. In particular, they have to sell at least 40% of their foreign currency to authorized banks immediately upon transfer or payment into the foreign currency account. However, under Official Letter No. 066/NHNN-QLNN dated 13 June 2001, the State Bank of Vietnam (SBV) announced that export processing enterprises and enterprises in EPZs are free from the obligation to sell 40% of their foreign currency revenue from current transactions.

The SBV issued on 18 May 2001 Circular No. 04/2001/TT-NHNN providing guidelines on foreign exchange control applicable to FIEs and foreign parties to business cooperation contracts (BCCs). According to Circular 04, foreign investors will be allowed to transfer abroad profits, shared revenues from joint ventures, incomes from services and technology transfer, legally owned capital and properties as of 2 June 2001. The Circular also specifies businesses which are allowed to open accounts at overseas banks. With respect to foreign currency balancing, its provides that FIEs and foreign parties to BCCs will be permitted to purchase foreign currency for current transactions and other permitted transactions which include repayment of principal, interest and fees on the short-, medium-, and long-term foreign loans, repayment of principal, interest and fees on foreign currency loans at banks authorized to operate in Vietnam, transfer overseas of legal capital or re-invested capital upon expiry or early dissolution of the business.

With regard to foreign loans, the SBV amended some items of its Circular No. 03/1999/TT-NHNN7 of August 12, 1999 providing guidelines for borrowing and repayment of foreign loans by enterprises. This amendment was introduced under Decision No. 1432/2001/QD-NHNN on November 16, 2001, according to which the time limit for registration of medium- and long-term loans with the SBV has been expanded from 15 to 30 days. Also under earlier Decision No. 980/2001/QD-NHNN dated 1 August 2001, the SBV has removed limits on lending costs (including interest rate, fees and relevant costs) for foreign loans. Accordingly, enterprises including FIEs are free to decide lending costs for foreign loans taking into account the prevailing interest rates in the international capital markets and the fees in accordance with the international practices.

Land and Housing

On 29 June 2001, the National Assembly adopted the Law on amendments of and additions to a number of the Land Law (which was issued in 1993 and once revised in 1998). The amendments to the Land Law, effective from 1 October 2001, simplify the procedures for allocation and lease of land, and especially vest greater authority in lower-level authorities to lease land lots to businesses and individuals. Businesses can build permanent premises on these sites, ending their dependence on short-term sub-letting arrangements. The Government has then issued two decrees providing guidelines for implementation of the amended Land Law, both effective from 1 October 2001. The first one, Decree No. Decree 66/2001/ND-CP dated 28 September 2001, states that people's committees of cities and provinces will issue land-use right certificates or "red books" to local organizations, foreign individuals and organizations using land in Vietnam and to pagodas, churches and oratories. They are authorized to transfer and lease land to organizations, households, individuals residing in inner towns and cities; foreign individuals and organizations, overseas Vietnamese who invest in Vietnam, and diplomatic and international organizations and agencies. District people's committees are authorized to issue red books to households, individuals, residential communities and overseas Vietnamese allowed to buy houses. The second one, Decree No. 68/2001/ND-CP dated 1 October 2001, covers rights and obligations of State agencies in land zoning and planning. It also states that land administration agencies must announce land zoning and planning within 30 days after approval by competent authorities.

Another important amendment to the Land Law is that overseas Vietnamese or Viet Kieu is officially permitted to buy residential houses in the country. On 5 November 2001, the Government issued Decree No. 81/2001/ND-CP providing the procedures for overseas Vietnamese to buy a house in Vietnam. Accordingly, there are four main categories of Viet Kieu who are allowed to buy a residential house in Vietnam, namely: (i) Viet Kieu committed to long term investment projects in Vietnam (i.e. Viet Kieu investors making investment in the country under the Law on Foreign Investment or the Law on Promotion of Domestic Investment); (ii) Viet Kieu who have made valuable contributions to the country as defined in the Decree; (iii) Viet Kieu who are specialists and socialists who have been awarded certificates in science, education and culture and economic experts who regularly come back to Vietnam and have been invited by the Government authorities to contribute their knowledge to the country’s development; and (iv) Viet Kieu who wish to stay permanently in Vietnam. However, the Decree makes it clear that Viet Kieu cannot own more than a house at a time. Like Vietnamese, Viet Kieu will be also granted house ownership certificate and land use right certificate for the land attached to the house. The procedures for owning a house will be finalised by the People’s Committee of district level within 60 days from the date by the buyer submits the documents to the relevant authorities. The Viet Kieu who has been granted the house ownership certificate and land use right certificate for the house he purchased shall be accorded certain rights: (i) to use the house for residential purpose; (ii) to sell and present the house to Vietnamese citizens and other Viet Kieu; and (iii) to pledge and inherit in accordance with the Vietnamese laws.

In November 2001, the Government issued new regulations to put the sale, lease, mortgage and transfer of land use rights on a more secure and certain legal footing and curb the level of "tacit consent" in property transfers. The regulations are provided under Decree No. 79/2001/ND-CP dated 1 November 2001 revising Decree No. 17/1999/ND-CP dated 29 March 1999 on the procedures for conversion, assignment, lease, sublease and inheritance of land use rights and for mortgage and capital contribution of the value of land use rights. Apart from making clearer the rights of land users and procedures for exercise of those rights, the Decree now allows family households and individuals using residential land to mortgage the value of the land use rights and attached assets to overseas Vietnamese and economic organizations licensed to operate in Vietnam as well as credit institutions licensed to operate in Vietnam.

To give more incentives for investors in development of residential houses for sale and lease, the Government also Decree No. 71/2001/ND-CP on 5 October 2001. Under this Decree, businesses including local ones and FIEs, investing in construction of residential houses for sale and lease shall be entitled to favourable conditions and incentives such as easier access to land for projects, reduction and exemption of land rentals, preferential corporate income tax, and so on.

Import and Export

In April 2001, the Government issued Decision No.46/2001/QD-TTg providing rules for management of import and export in the period of 2001 – 2005 instead of the rules annually introduced and applied in the past years. This is a major change in the way the Government regulates the import and export activities, and the new rules, effective from 1 May, 2001, have been widely welcomed by businesses, since they are more stable, further liberalized and importantly foreseeable for businesses in export and import activities.

For the implementation of the five year import-export regime, Decree No. 57/1998/ND-CP guiding the Trade Law in respect of import-export, processing and agency with foreigners were revised in August 2001 under Decree No. 44 /2001/ND-CP dated August 2, 2001. With respect to FIEs, they are officially permitted to purchase the commodities other than those manufactured by themselves (under the investment license) in order to process for export or export, except for those commodities under the list of commodities prohibited from export and certain other products as stipulated by the Ministry of Trade from time to time. This broadened right to export was detailed under Circular No. 26/2001/TT-BTM of the Ministry of Trade dated 4 December 2001, which amended Circular No. 22/2000/TT-BTM dated 15 December 2000 guiding the import-export and other commercial activities of foreign invested enterprises. Decree 26 also published a list of commodities that FIEs are not allowed to purchase for export, such as rice and wild animals.

The introduction of the new Customs Law is another big step forward in creating a friendly-business environment. The Customs Law was passed by the National Assembly on 29 June 2001 and came into force as of 1 January 2002. The Law comprises 8 chapters with 82 articles, regulating the State’s customs-related management of goods exported, imported or in transit, exiting, entering or transiting means of transport, organization and operation of Vietnamese customs, and so on. Under the new rules, about 17 steps in customs process are cut to just five. All export goods shall be checked at the border gate, not on commercial premises, in an attempt to control bribes. Customs officials are not allowed to escort goods to the exit port and number of officials required to supervise is dramatically reduced. Any enterprise which has not been subject to administrative fines for customs procedures for two consecutive years will be able to send their goods direct to the border gate and is exempt from inspection. Importers and exporters shall take their own responsibility for declaring their cargo, and calculating and paying tax. Customs officers will then complete administrative procedures and approve the shipment as quickly as possible.

Taxation

On 8 March 2001, the Ministry of Finance issued Circular No. 13/2001/TT-BTC guiding the implementation of regulations on taxes applicable to foreign invested forms under the Foreign Investment Law in Vietnam. The circular, replacing Circular No. 63/1998/TT-BTC and Circular No. 89/1999/TT-BTC, is applicable to FIEs, foreign parties to BCCs, joint venture banks between Vietnamese and foreign banks, insurance and insurance brokerage enterprises established and operated under the Foreign Investment Law and the Law on Insurance Business, BOT (build-operate-transfer), BTO and BT enterprises. However, the circular shall not apply to companies engaged in exploring and exploiting oil and gas under the Oil and Gas Law in Vietnam.

The circular covers corporate income tax, tax on profit remittance, export and import taxes, capital gain tax and other taxes and financial obligations. The circular also provides measures for anti-avoidance transfer pricing among associated companies. Under the circular, corporate income tax will be reimbursed, either partially or fully, to foreign investors who re-invest profits or other income earned locally into projects within Viet Nam for at least three years. Tax reimbursement will be made within 15 days after receipt of proper documents. However, reimbursements will not be allowed for tax paid on profits already remitted overseas, or used for other purposes, before being re-invested in Vietnam. Companies which manufacture goods for export can delay paying import tax on raw materials for a period of nine months from receipt of the customs' official tax announcement. Producers who operate on a different production cycle will be allowed to claim a longer postponement. In respect of transfer pricing, certain associated company transactions may be adjusted where deemed to be not at arm’s length. The tax authorities may use three methods to adjust transfer prices, namely market price comparison, determination of purchase price on the basis of selling price, or cost of production to determine taxable profits.

For oil and gas companies, the Government introduced under Circular No. 48/2001/TT-BTC of the Ministry of Finance dated 25 June 2001 providing sweeping changes to the way these companies are taxed, following the amendments to the Law on Oil and Gas, in an effort to increase its tax revenue from the exploitation of oil and gas. Businesses engaged in exploration and exploitation of oil and gas in Vietnam are subject to value added tax, corporate income tax, royalties, import and export tax, capital gains tax, and profit remittance tax, and others.

For the personal income tax, the National Assembly passed on 19 May 2001 a new Ordinance on Income Tax of High Income Earners in replace of the Ordinance on Income Tax of High Income Earners of 1994 (as amended twice in February 1997 and June 2001). The new Ordinance, effective from 1 July 2001, provides for some positive changes to taxable starting level and tax rates imposed on high-income earners, particularly for Vietnamese employees. For implementation, the Government has issued guidelines under Decree No. 78/2001/ND-CP dated 23 October 2001. Of note under the new rules, for Vietnamese employees, the taxable starting level is raised from VND2,000,000 to VND3,000,000. The former ceiling rate of 60% has been abolished. The starting level for additional tax has been raised from VND8,000,000 to VND15,000,000. The rate for additional tax is 30%. For foreign employees, the tax rates remain unchanged, with the taxable income threshold is VND8,000,000 (Approx. US$533). For those foreign employees who work in Vietnam for between 30 and 182 days, a tax rate of 25% (formerly 10%) of the aggregate income shall be applied. The rules also specify certain income not subject to personal income tax. Those incomes which are now not subject to tax include "allowance for responsibility" and "money paid for social insurance or medical insurance from salaries and wages of employees". Non-taxable special allowances for certain industries and trades are now specified by laws and not limited to forensic medicine and surgery.

Culture and Education

On 4 May 2001, the Government issued Decree No. 18/2001/ND-CP on regarding establishment and organization of foreign cultural and educational institutions in Vietnam ("FCEIs"), effective as from May 19, 2001. FCEIs to be established in Vietnam to develop education and cultural exchanges for non-profit purposes are encouraged under this Decree, particularly in the areas of training, improving and enhancing skills in fields of culture, art, and information; training highly educated technical workers, scientists and managers; co-operatively developing cultural works and so forth. FCEIs are established in Vietnam under the forms of representative office; associated institution; and independent institution. FCEIs in Vietnam are entitled to recruit employee, to import necessary means and equipment for the operations, to open account at a bank allowed operating in Vietnam.

Medicine and Health Care

The Ministry of Health issued circular No.10/2001/TT-BYT guiding foreign investment in medical examination and treatment fields on 22 May 2001, which takes effect on 6 June 2001, and replaces Circular No.22/BYT-TT dated 29 December 1994. Under the new Circular, foreign individuals and organizations are allowed to invest in medical examination and treatment fields under the following forms: hospital; clinic, para clinic; and assistance services to carry patients abroad. Foreign investors must obtain an investment license from the MPI for establishment of an institution engaged in medical examination and treatment. In addition, before putting the project into operation, the institution must get a Certificate of Full Qualifications for Medical Examination and Treatment Practices from the Ministry of Health.

Travel and Tourism

On 5 June 2001, the Government provided guidelines for business in the fields of travel and tourism. The guidelines, under Decree No. 27/2001/ND-CP also cover FIEs and foreign parties to BCCs. Under this Decree, 100% foreign owned companies are not allowed in the international travel business. After the investment licences are issued, joint venture companies and foreign parties to BCCs involved in the international travel business must satisfy certain business conditions: (i) obtaining an international travel business license from the provincial tourism department; (ii) opening an escrow account of VND 250 million; and (iii) having at least three guides who have been granted tourist guide certificates.

Labour

Under its Official Letter No. 2321/LDTBXH-TL dated 6 August 2001, the Ministry of Labor, War Invalids & Social Affairs has provided clarifications for the payment of salary to Vietnamese employees at FIEs. Accordingly, those FIEs and foreign-owned agencies which have fixed their workers' minimum salary and other allowances in US$ but actually paid in VND, then the payment must base on the average inter-bank foreign exchange rate fixed by the SBV at the time of payment. Though this regulation was issued by the Prime Minister in December 1999 (for implementation of Decision 53 as mentioned earlier), some FIEs have till now applied the exchange rate of VND 13,910/US$ (the current rate is VND15,000/US$), and this has obviously caused loss to employees.

On 19 October 2001, the Government issued Decree No. 75/2001/ND-CP on amendments to Decree No. 46/1999/ND-CP dated 1 July 1999 and Decree No. 85/1998/ND-CP dated 20 October 1998 on recruitment, employment and management of Vietnamese employees working for foreign organizations and individuals in Vietnam. Decree 75 provides for important changes to Decree 85 on recruitment of Vietnamese staff through labour supply agencies. Drastically, FIEs, foreign parties to BCCs and foreign company branches are no longer subject to the requirement under Decree 85, and are free to recruit Vietnamese staff directly. "Representative offices for non-profit purposes in Vietnam of economic, trade, finance, banking, insurance, science – technology, culture, healthcare organizations and other fields" are subject to Decree 85, i.e. recruitment must be made through a labor supply agency. They may recruit Vietnamese employees directly if the labour supply agency fails to meet their requirement within 15 days (formerly 30 days).

Equitization of FIEs

As part of the process to establish a level playing field for both domestic and foreign investors, especially to unify the legal environment, the Government at the beginning of the year gave a green light for transfer of some FIEs into shareholding companies on pilot basis. The MPI has been assigned the task to draft the regulations on this. In June 2001, a draft of the proposed Regulations on Conversion of Form of Operations of a Number of Enterprises with Foreign Owned Capital from Limited Liability Companies to Shareholding Companies ("Draft Regulations") was released for comments. According to the Draft Regulations, those FIEs satisfying the three conditions below shall be allowed to convert into shareholding companies: (i) the legal capital having been fully contributed; (ii) having been operational at least 3 years and profitable at least in the last consecutive 2 years; and (iii) having a number of shareholders as required by the Enterprise Law (at least 3 shareholders). The Regulations will be issued in the form of a decree issued by the Government, which is expected to be passed in the first quarter of this year. So far, fourteen FIEs have submitted their proposals to the MPI for "equitization" (as it is called in Vietnam), of which some are Hanoi Fortuna Hotel, Vinausteel, Shi Jar Vietnam (Ceramics). Investors comment that the equitization and subsequent listing would facilitate the development of the capital market and especially the securities market in Vietnam which is still quite small now, with little participation of foreign investors. However, the big concern from lawmakers as well as businesses is that one decree cannot solve the problem, since FIEs and local companies are operating under two legal systems (the former is governed by the Foreign Investment Law, while the latter under the Enterprise Law).

Trade Pact Ratification

The last but not least, important development in the year 2001 would be the ratification of the Bilateral Trade Agreement (BTA) between the United States and Vietnam by the National Assembly on 28 November 2001 following the approval by the US Congress in October 2001. On December 10, 2001, US Trade Representative Robert B. Zoellick and Vietnamese Trade Minister Vu Khoan exchanged diplomatic notes in Washington DC to give effect to the BTA. This important trade pack proves a major step forward in Vietnam’s efforts to integrate into the global economy. Comprising 7 chapters, the agreement covers the four major areas: (i) trade in goods; (ii) protection of intellectual property rights; (iii) trade in services; and (iv) investment. With the taking effect of the BTA, US tariffs on imports from Vietnam have dropped from an average of 40% to an average of 3%, allowing Vietnamese exporters to compete on level terms in the US market. The BTA also requires that state-controlled industries compete with foreign owned companies, and intellectual property and investment guarantees be raised to international levels. US companies will initially have restricted access to Vietnam’s banking, insurance, telecommunications, tourism and technical service markets. That will be slowly lifted over a seven-year period.

The BTA is expected to give a sharp increase of Vietnamese exports to the US, especially for garments, textiles, footwear and seafood, and promote investment from the US and other countries into Vietnam. According to the World Bank estimate, Vietnam’s exports to the US could double from the current $800 million a year. However, the most important thing for Vietnam is that the trade pact would accelerate the process of economic reforms that are underway in the country

Conclusion

The legal developments in the year 2001, especially the remarkable BTA, show continued efforts of Vietnam in its process of economic reform and integration into the global economy. Legal improvements have been made in various areas in order to make its legal system in compliance with the international level. With its commitments under the BTA, Vietnam has still a lot to be done for perfecting its legislation. However, what achieved the last years would be the profound basis for the country to move further forward in the years ahead.

FOOTNOTES

1. This was expressly stated in the 9th Congress of the Vietnamese Communist Party in April 2001, which launched the Strategy for Socio-Economic Development 2001-2010 and Plan for Socio-Economic Development 2001-2005.

 

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.