FACTS AND FIQURES — Vietnam attracting investors

From the start of its transition process, Vietnam’s foreign direct investment was expected to play a key role in upgrading the country’s infrastructure and productive capacity, and it has done so. Disbursements, which have grown rapidly in recent years, are projected at just below US$1 billion in 1995, with a large stock of committed capital still to be disbursed.

One of Vietnam’s first major reform measures was the Foreign Investment Law of Dec. 9, 1987. Though enacted somewhat later than comparable legislation elsewhere in the region (and at a time when Vietnam lacked a supporting legal framework, and elements of planning still pervaded its economy), the original law was liberal by international standards. After several subsequent amendments, Vietnam’s regulations now compare favorably with regimes elsewhere in terms of tax incentives, import privileges, access to economic sectors, and approved ownership structures, such as joint ventures and foreign-owned enterprises. Indeed, Vietnam offers generous tax concessions and duty exemptions, welcomes foreign investment in all economic sectors with the exception of defence industries, imposes no minimum capital requirement, permits 100% foreign ownership, and guarantees the unrestricted repatriation of capital and profits.

To expedite its approval process, the government, at an early stage, designated the State Committee for Co-operation and Investment as the sole agency responsible for evaluating and approving investment applications. The licensing process, however, has remained complicated and lengthy because most projects still require additional approval from other agencies, including local authorities. According to a local 1994 survey, the licensing of joint ventures took an average of one year, and that of wholly owned, foreign-owned enterprises took twice as long. Cumbersome administrative procedures are seen as the greatest challenge facing potential investors. In response to complaints about burdensome procedures, the government took measures in early 1995 to streamline the administrative process. Strict time limits were set for the authorities to raise any objections to investment applications, and responsibility for larger projects was shifted to the Prime Minister’s office. This appears to have helped spur the disbursement of investment commitments, although other hurdles, including a still weak legal system and a prohibition on the ownership of land, remain.

— From a recent issue of “IMF Survey,” published by the International Monetary Fund.