Door opens to foreign investment
HA NOI (March 13, 2003) — Prime Minister Phan Van Khai has endorsed a landmark decision allowing foreign investors to acquire up to a 30 per cent stake in Vietnamese companies in the public sector.
Prime Ministerial Decision 36/2003, issued on Tuesday, states the move is aimed at encouraging foreign investment in State enterprises which need foreign expertise and management methods as well as foreign technology and capital in order to gain influence and competitiveness.
Le Dang Doanh, senior adviser to the Planning and Investment Minister, said the move reflects the Government’s commitment to improve the business environment of foreign investors.
Vietnamese businesses open to foreign stakes include all forms of enterprises except those in the private sector. The decision therefore affects one-member liability State companies to be converted into joint-stock businesses, joint-operation businesses, and federations or co-operatives operating in one of the 35 trade areas listed by the Ministry of Planning and Investment (MPI) last May.
"The decision is positive in the sense that it creates more channels for capital to enter Vietnamese firms," an MPI official said.
"More importantly, local firms are likely to gain technical know-how and management skills from deals with foreign entrepreneurs."
Investors will not only be entitled to buy stakes in Vietnamese enterprises but will also be allowed to contribute capital in assets such as equipment, technology, material capital, intellectual property and securities.
Foreign stakes exceeding 30 per cent of the company’s legal capital will be subject to the Law on Foreign Investment, according to the decision.
Local People’s Committees will be in charge of deciding whether foreign investors can buy into equitised State-owned companies. In the case of a joint-stock company, a one-member limited company, a join operation business or a co-operative, the management board will take the decision.
In all cases, the foreign investor will deal directly with the company it buys into.
If the combined stake foreign businesses want to acquire exceeds 30 per cent of the total capital, an auction must be organised in which the Vietnamese company will select its partner.
A new factor that has drawn the attention of investors is that foreign buyers are now allowed to use their shares in Vietnamese businesses as mortgages in credit transactions or to list them on the stock market.
The principals and interests of the securities can be converted into foreign currency and transferred abroad. If re-invested in Viet Nam, they will benefit from favourable terms under the Law on Domestic Investment Encouragement or the Law on Foreign Investment.
Foreign economic and financial institutions, and foreigners residing in Viet Nam or abroad allowed to invest in Vietnamese enterprises are exempt from personal income tax on revenues generated by their stakes or capital contribution and are entitled to join the company’s management board.
The new prime ministerial decision replaces Decision 145/TTg dated June 28, 1999, which allowed foreign investors to buy stakes in designated Vietnamese firms as part of a pilot scheme. — VNS
