With the aim to improving the investment environment, increasing the transparency of the administrative procedures, and increasing benefits for investors and businesses, the Ministry of Planning and Investment (MPI) proposes various changes to the current Law on Investment and the Law on Enterprises. The amendments are projected to be discussed and passed at the 13th National Assembly in this October. These draft amendments have gained significant attention and opinions from related departments, economic experts and enterprises, and the change that receives the most attention is the proposed modifications to the issuance of investment certificate.
Currently, in order to do business in Vietnam, under the Law on Investment and the Law on Enterprises, foreign investors are required to obtain investment certificates from an appropriate Licensing Authority. Under the Investment Law, investors may invest in all sectors not prohibited by law and they have to follow the licensing and registration steps depending on the size and the sector of the investment project. The official stated timeframe for obtaining such a certificate is two weeks. The investment certificate, once issued, has a fixed term of up to 50 years, though it can be extended up to 70 years upon approval by the Government. It will detail the scope of the activities that the investor is allowed to undertake, the amount of investment capital permitted, and will also list all applicable incentives. After receiving the investment certificate, the investor can apply for other permits, such as a Land Use Right Certificate or Construction Permit.
However, there are many problems with the existing investment certificate issuance process. First, obtaining an investment certificate, particularly one where Prime Ministerial approval is needed, is a process that normally takes months, not days as official documents will assert. This is due to bureaucratic backlogging combined with a lack of funds, which make it difficult to issue these licenses on time. Pizza Hut, for instance, spent 14 months to get an investment license to open its first branch in Ha Noi. When the company applied to open three more restaurants in Ha Noi, besides completing auxiliary certificates for food hygiene and safety, environment, financial demonstration and audit reports, license-issuing agencies asked the company to submit comments from localities on where the restaurants would be built. Also, even though the procedure to apply for an investment certificate is published, the process is still very complicated and investors find it hard to complete it without the help of a government staff or a professional service provider.
According to the draft amendment to the Investment Law, MPI would consider removing the issuance of investment certificates to further simplify the procedure, except in four sectors: a conditional business sector like banking; those sectors that use a lot of land; polluters of the environment; and sectors that need licenses to get investment incentives. The proposal has been described as a progressive step in improving the business environment and has been believed to improve foreign-owned enterprises' business operation and bring in more opportunities. For example, a representative of Honda Vietnam said that Honda Vietnam received several purchasing requests for processing machine operators from Honda's many branches in different countries but it could not process them because its business scope did not include this business activity. In order to export these operators, according to the 2005 law, Honda Vietnam would have to register for another business line and summon an Advisory Board meeting, which was a very time-consuming process. As a result, this amendment is projected to create a more favorable business environment for enterprises in the near future.
However, there remain some concerns over the elimination of investment certificates. For businesses, many FDI enterprises maintain that they still need investment certificates as they believe this paper is the passport for them to get continued incentives. In addition, this is a legal basis for investors to rent land or apply for bank loans. For government agencies, the removal of the investment certificate can make it hard for them to manage and monitor foreign enterprises. Also, it will give the opportunity for foreigners to establish fake companies in Vietnam, or companies that only exist on paper, making government authorities to manage a big number of businesses that make no contribution to the economy.
Hong Hanh IPC Danang compiled
