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2008-2010

Vietnam Briefng
Collection
Established in 1999, Asia Briefng is dedicated to providing individuals and enterprises with the latest business and regulatory news
as well as expert commentary related to conducting business in emerging Asia. The publishing house is a fully-owned subsidiary
of Dezan Shira & Associates and publishes magazines, news, business guides and regional guides for China, India, Vietnam and
other key nations in Asia.
About Asia Briefng
2008 April
Global Manufacturing Moving to Vietnam
2008 November
Establishing Business in Vietnam
2009 September
Vietnams Industrial Zones
2010 April
Managing Human Resources in Vietnam
2010 August
Establishing Representative Ofces in Vietnam
2010 November
Understanding Vietnams Legal Environment
Knowledge and expertise is contributed by the legal, tax and accounting professionals
at Dezan Shira & Associates, a specialty foreign direct investment consulting frm

All publications are available on Asia Briefngs online bookstore at
www.asiabriefng.com/store
VIETNAM BRIEFING
Vietnam Foreign Direct Investment Advice From Dezan Shira & Associates
Complimentary online subscription at www.vietnam-briefng.com Volume I - Number I
Global Manufacturing
Moving to Vietnam
In This Issue:
Why Manufacturers are Moving to Vietnam
The China Plus One Strategy
Infrastructure Key to Vietnam/ASEAN Development
Spring
2008
2 Vietnam Briefng | Spring 2008
Alberto Vettoretti,
Managing Partner,
Dezan Shira & Associates,
Vice-Publisher,
Vietnam Briefng
Welcome to Vietnam Briefng!
Chris Devonshire-Ellis,
Senior Partner,
Dezan Shira & Associates,
Publisher,
Vietnam Briefng
Welcome to the frst issue of Vietnam Briefng, a new magazine designed to concentrate and comment on
foreign direct investment into the Vietnamese market. In this issue, we focus on the current movement of
manufacturers away from South China towards Vietnam, and analyze the benefts to having a China plus one
strategy. We also take a look at Vietnam's infrastructure and its place in the region. As China rises, Vietnam
and the other ASEAN member nations are seeing increased opportunities for trade and cooperation, but fears
of China also permeate and with its unique geographical position, Vietnam is at the crossroads of Southeast
Asia's development.

Vietnam Briefng is produced by the Asian business advisory and tax consulting practice Dezan Shira &
Associates, who have a signifcant presence in China, India and Vietnam, providing international investors with
corporate establishment, business and tax advice. Please feel free to contact us at vietnam@dezshira.com or
visit our website www.dezshira.com.
With best regards,
Chris Devonshire-Ellis Alberto Vettoretti
All materials and contents 2008 China Briefng Media Ltd.
No reproduction, copying or translation of materials without prior permission of the publisher. Contact: editor@vietnam-briefng.com
3 Vietnam Briefng | Spring 2008
Where the manufacturing world is moving to
Where the manufacturing
world is moving to
[ By Alberto Vettoretti, Managing Partner, Dezan Shira & Associates ]
N
ot l ong ago, t he maj or i t y
o f i n v e s t o r s f r o m t h e
ma n u f a c t u r i n g s e c t o r
considered China the safest place for
investment, however, as China's costs
have risen, those manufacturers are
now looking at other countries that
offer new investment alternatives and
opportunities in the quest towards
sust ai ni ng compet i t i veness. The
manufacturing world is now, more than
ever, facing exciting yet challenging
times.
Some of the major local and foreign
retail outlets in China today source from
around the world bamboo baskets
and shoes made in Vietnam, bed sheets
and scarves imported from India or
Bangladesh, carpets and accessories
made in Indonesia. If the big retailers,
who are also the largest buyers, find
the most competitive quotes for these
products elsewhere, then what will
happen to the equivalent local products
made in China.
China' s huge economy is losing its
advantages as the world' s cheapest
manufacturing center. Over the past
year, factory profts have been squeezed
by the following main factors:
inflation at the highest level in the
country since the mid-90s
energy and raw material costs are
rising
energy supplies in certain developed
investment locations have dwindled
taxes have increased as a result of
the new corporate income tax law
(from increased profit taxes, to the
cancellation of tax-breaks on profit-
reinvestment to withholding tax on
dividendsalthough this has yet to
manifest itself on the profit and loss
account)
the RMB has appreciated, albeit at a
controlled rate.
export rebates have been slashed on
over 2800 products accounting for
more than 40 percent of Chinese
exports
bar r i er s and quot as t o Chi nese
manufactured products have increased
around the world
a ne w l a bor l a w wi t h s t r i c t e r
enforcements has increased labor
costs.
All these factors are affecting existing
companies as well as new entrants.
The l at t er ones may al so be faced
with stricter environmental approvals
required for new projects, stricter
approval procedures for non-encouraged
enterprises, and rising overall costs
throughout the country.
China has clearly spelled out that it
is not interested any longer in labor-
intensive, high-polluting, high-energy
consumi ng and l ow val ue- added
industries. Government policies have
thus deployed this new economic
direction through the publication of a
new investment catalogue; the impact
of which is being felt in the developed
parts of South China.
The Go-West campaign to develop
China' s internal regions through an
inflow of FDI lured by lower costs
has not yet gained momentum. Tax
policies and labor enforcements are still
applicable throughout the country and
costs will not diminish in the medium to
long term.
South China could be hurt the most
by all this and even though recent
ne ws pa pe r s f i gur e s s e e m t o be
exaggerated reporting that at least one
sixth of all Hong Kong-run factories in
the Pearl River Delta could be forced
to move elsewhere in the country the
savvy investor will need to reflect on
the fact that other neighboring Asian
countries may represent a potential
alternative at least to consider as a
sounding board to evaluate an expansion
or relocation plan.
Investors from the United States or
Europe may also be lured by solutions
4 Vietnam Briefng | Spring 2008
Where the manufacturing world is moving to
closer to home in Mexico and Eastern
Europe respectively. However, from
a European investor' s point of view
particularly, and with the Euro at an all
time high, China is still competitive.
Cost i ncreases bei ng fel t by U. S.
companies are not yet apparent for
European investors and the country,
with its highly developed and modern
supply chain and effcient infrastructure
base, represents a location if not the
best one for horizontal production.
With the idea of the ideal location for
manufacturing (and services) becoming
more and more a moving target, Dezan
Shira & Associates has decided to
look at Vietnam (in addition to India)
with a closer eye and a direct presence
on the ground. Vietnam Briefing will
provide constant updates and insights
on how the investment scenario is
shaping up and how new legal and
tax regulations will affect FDI in the
country. Our unique position of having
a presence in four distinctive legal and
tax jurisdictions bordering each other
China, Hong Kong, India and Vietnam
enabl es us t o conduct det ai l ed
research into where the manufacturing
and service sectors in this part of the
world are moving to. We are able to
provide the insight required to better
evaluate entry-strategies taking into
consi derat i on t he overal l regi on' s
advantages and disadvantages.
Why Vietnam
There has been a lot of interest in
Vietnam since the country became
the 150th nation to officially join the
WTO just over a year ago. Accessing
the international body has meant an
increase in the country's attractiveness
to FDI which gained momentum back
in 1986 when Doi Moi, or open door
policy, was launched. After joining the
WTO, Vietnamese legislators have been
determined to implement commitments
by improving the regulatory climate
and issuing new laws in conformity
with international practices and WTO
r egul at i ons. WTO accessi on has
spurred confidence for investments
in the country with its commitment
to adhere to an international system
resulting in US$20.3 billion of FDI
registered last year, a 69.1 percent
increase over 2006.
Similarly to China, FDI contribution
to the local economy is vital. FDI in
Vietnam accounts for 55 percent of the
country's export value, 36 percent of
its gross manufacturing output and 16
percent of its GDP, as per the charts
below.
China's GDP
Year GDP
(US$ trillion)
Year-on-year
growth %
2003 1.94 10.0
2004 2.28 10.1
2005 2.63 10.2
2006 3.03 10.7
2007 3.56 11.9
Source: National Bureau of Statistics
Vietnam's GDP
Year GDP
(US$ billion)
Year-on-Year
growth %
2003 144.03 5.9
2004 159.68 6.4
2005 178.07 7.0
2006 198.72 6.8
2007 221.32 7.1
Source: Economist Intelligence Unit
Vietnam's GDP grew by 8.5 percent in
2007, reaching US$740 per capita, still
about 1/3 of China's GDP, which grew
by 11.4 percent in 2007. At a recent
investment seminar, Dr. Bui Quoc
Trung, Deputy Director General Foreign
Investment Agency under the Ministry
of Planning and Investment announced
that the government plans to maintain
an 8.5 percent GDP growth target until
2010. To achieve this, US$150 billion
in investment will be required; of which
about 40 percent will have to be in the
form of FDI. It goes without saying that
this represents a terrifc opportunity for
a lot of foreign investors.
China's FDI
Year Used FDI (US$ billion)
2003 56.14
2004 64.07
2005 60.33
2006 63.02
2007 83.70
Source: National Bureau of Statistics
Vietnam's FDI
Year Registered FDI (US$ billion)
2003 1.51
2004 2.08
2005 5.30
2006 10.20
2007 20.30
Source: General Statistics Offce of Vietnam
FDI is welcome in different industrial
s ect or s : i nf r as t r uct ur e, mi ni ng,
manufacturing, oil refning, construction
materials, hotel and resort management,
and high tech industries to name a few.

Investment in agriculture, education and
training, tourism and health care is also
encouraged. In this respect, the attitude
towards FDI seems to be more liberal
than in China or at least the commitment
of the local authorities indicates this
may be the case.
5 Vietnam Briefng | Spring 2008
Where the manufacturing world is moving to
Vietnam boasts a favorable geographical
location due to its proximity to China
and as a crossroads for the upper regions
of Southeast Asia. Looking at the future
economic development of the region,
Vietnam well situated to be the main
beneficiary of the China plus one
strategy. The theory behind China plus
one is based on the fact that there is an
emerging concern about concentrating
all investment in just one place.
Vietnam, with most-favored-nation
trade status in the United States, is
an increasingly important investment
destination, especially for those U.S.
manufacturers looking to sell back to
the countries where they are located
or elsewhere in Asia Pacifc. This does
not necessarily mean that companies
will withdraw investment from China
and t ransfer i t el sewhere. On t he
contrary, companies must strengthen
their presence in China and consider
it as a vital sales and profit center for
future activities should they want to be
closer to current international and local
markets. The risk of diversification
away from China is as big as any risk of
being only in China.
Vietnam has a population of almost 90
million, making it the 13th largest in the
world. Sixty percent of the population
is under 25 years of age and 35 percent
of the working force is under 35. With
literacy rates over 90 percent, Vietnam's
population represents a potential market
for virtually every product and service.
Wi t h i t s a b u n d a n c e o f n a t u r a l
resources Vietnam has also a proven
competitiveness as a global exporter
across a range of products. Interestingly,
the country is the world largest exporter
by volume of shrimp and black pepper,
the second largest for rice and coffee,
the fourth largest for rubber and a net
exporter of energy. It is the third largest
oil producer in Southeast Asia with
crude oil contributing to more than 20
percent of the country's total exports in
2007.
Usually, big opportunities do not come
without related risks and challenges
and investing in Vietnam is a point in
case. Massive investment requirements
in infrastructure mean that what is
currently available is far from meeting
current demand and expect at i ons.
Infrastructure is generally inadequate
and current seaport s, ai rport s and
highways all need to be improved and
expanded.
As a result of ineffcient transportation
networks, access to raw materials may
be diffcult and local suppliers may not
yet be up to speed with required quality
levels in certain industries. As a result,
the market for production investment is
more suitable to vertical manufacturing
and key raw materials may need to be
imported at least for a while until local
quality standards improve.
Vi et nam' s l abor cost i s, general l y
s peaki ng, cheaper t han Chi na' s .
Although the overall level is much
lower than China's developed areas,
manufacturing labor costs are already
on the rise. Minimum wages increased
40 percent in 2006 and 15 percent in
2007. Experienced managers are in
short supply and companies are forced
to up wages to retain talented personnel.
Training is a must for any employer and
the investment on this could be quite
substantial. As far as labor regulations
and practices are concerned we are
treading along a much more strict and
enforced scenario if compared to China
(although recent labor law regulations
are changing this): labor unions are
required and do play an important role
in the company, strikes are a normal
channel to voice worker dissatisfaction
or new r equi r ement s and f i r i ng
employees is extremely diffcult without
paying a toll.
Social unrest ratings
Country Social instability Political insurrection
Hong Kong 1.23 0.61
Singapore 1.29 0.50
Vietnam 2.91 2.50
South Korea 3.01 1.00
China 3.04 2.50
Malaysia 5.08 3.84
Thailand 5.64 5.34
Indonesia 7.38 7.43
Philippines 7.63 8.25
Source: Political and Economic Risk Consultancy, Comparative Country Risk, Jan-07
Political risk ratings
Country Political score Global rank Rank sampling
Singapore 97 1 1
Vietnam 87 10 2
Hong Kong 87 10 2
Malaysia 86 13 4
China 83 20 5
South Korea 79 39 6
Philippines 69 85 7
Indonesia 61 106 8
Thailand 59 110 9
Source: Business Monitor International, short-term political risk ratings, 2007
6 Vietnam Briefng | Spring 2008
Where the manufacturing world is moving to
On July 1, 2006 the Law on Investment
and t he Law on Ent er pr i ses t ook
effect. The laws broadened investment
and bus i nes s oppor t uni t i es and
grant ed great er ri ght s t o i nvest i n
different sectors: import and export,
t rade t echnol ogi es, mort gage and
access to public services under non-
discriminatory principles. Local content
requirements and export ratios have also
been scrapped. Tardiness to implement
WTO commi t ment s however, has
slowed the process. Guiding documents
have been deployed with a certain
delay and even though, legally, WTO
commitments take precedence over
domestic law, in reality, ministries sit on
the fence and wait for Vietnamese laws
to be passed before acting. This is the
case in many sectors from insurance to
distribution whereby further discussions
with the Ministry of Industry and Trade
must take place.
To add to the confusion, unrelated
to specific WTO requirements, the
government has tried to push control
down to the provincial and city level
bureaus where there has been a failure to
implement Hanoi's will. Many decisions,
refecting a local unwillingness to take
responsibility, are still referred back to
the Ministry of Planning and Investment
or to other ministries in the capital city.
There are also often numerous internal
documents and rulings concerning
certain investment categories that are
not currently publicly disclosed and
this can create further obstacles to the
advancement of a project.

Vietnam is generally opening up to FDI
in line with its WTO commitments; a
few examples in selected areas are listed
below (for complete lists please e-mail
us at vietnam@dezshira.com):
Architectural services, construction
and related engineering services: 100
percent foreign-invested enterprises
can be registered, but they can only
provide services to other 100 percent
foreign companies for two years from
accession. There will be no limitations
after 2008.
Market research services: only JVs are
allowed with no more than 51 percent
of foreign capital allowed. There will be
no limitations after 2009.
Education: JVs with no restrictions
over f or ei gn equi t y owner shi p i s
required, 100 percent FIEs allowed after
2 years from accession. In secondary
education, no foreign participation is
allowed until 2010.
Healthcare: 100 percent FIEs health
facilities can be registered and operated.
Distribution: after 2008, the limit of 49
percent foreign equity ownership will
be abolished; from 2009, 100 percent
FIEs can be established for distribution
activities; please note that restrictions
apply to particular categories of goods.
Securities services: minority JVs can
be established; 100 percent FIEs are
allowed to be established five years
after accession in 2012.
In the next issue of Vietnam Briefing,
we shall give indications about where
about i n t he count ry you shoul d
invest in a particular industry and the
related geographical tax incentives
offered to foreign investors. For more
information on investing in the country
please contact Alberto Vettoretti at
vietnam@dezshira.com.
7 Vietnam Briefng | Spring 2008
The China plus one strategy
The China plus one strategy
[ By Chris Devonshire-Ellis, Senior Partner, Dezan Shira & Associates ]
T
raveling around California and
Nevada recently, it struck me in
talking to American businesses
large and small how much the Far East
is changing in perception for the United
States. Perhaps now with an increased
confidence in all things China, savvy
U.S. corporations are instructing their
business development managers now
10, 15 years down the track of running
around Beijing, Shanghai, Guangzhou
and some of China's second tier cities
to look even further a field. Other
domestic markets and other alien tax
incentives beckon. The same is true,
but for different reasons, for smaller
businesses.
One entrepreneurial businessman I met
was telling me China has gotten too
expensive, and certainly now in Beijing,
where he's currently based. Tianjin,
he said, referring to the major, yet
somewhat shabby port city just 100
kilometers east of Beijing. I need to
consider relocating to Tianjin; or failing
that, Vietnam. I passed through there
on my last Asia trip and it's looking
promising.
The consistent views are interesting, and
denote the beginning of what has been
called the China plus one strategy that
is forming in the minds of American
businessmen. Two main factors are
driving this, those two old chestnuts,
economics, and opportunity.
The economics theory behind China
plus one works like this: as China is
getting wealthier, and its population
older, it is getting more expensive to
manufacture there. Wages are rising
and so are the prices of commodities.
China is experiencing some worrying
inflationary trends right now that are
pushing up the prices of everything
from a bowl of rice to apartment rentals.
Added to that, China unifed its corporate
income tax system last year, bringing
the previous low rates that foreign
businesses enjoyed up in some cases
from 15 percent to 25 percent. Certain
tax incentives have also disappeared,
making other Asian destinations now
more attractive than China for the receipt
of foreign investment.
To compound this, the United States
has quota systems in place for Chinese
textiles, agricultural products and a
whole host of other items, meaning once
those quotas are used and the annual
quotas have tended to have been reached
after just 9 months there are no more
permissible U.S. imports. Accordingly,
some manufacturers are considering
opening up elsewhere, or moving their
operations entirely. Vietnam, with
American most-favored-nation status
is a prime recipient of this investment,
especially for export manufacturers
looking to sell back to the U. S. or
markets elsewhere. It also has no U.S.
quota-based issues to worry about.
The opportunity factor is different
however. While they are still largely
the preserve of the billion dollar plus
multinationals that perceive other
markets in Asia as being prime for
expansion to sell products to India's
massive (and wealthy) middle class,
Vi et nam' s 90 mi l l i on burgeoni ng
consumers these emerging markets
are ripe for all manner of development.
The big corporations have added these
destinations to the list of locations their
hard pressed development executives
have to fy around to.
The si gns ar e on t he wal l . Ever y
single American corporation I saw in
California has a China plus one strategy.
They may not have called it that, but
they have it. They have issues that need
solving with staff they have already
contracted and sent out to India and
Vietnam to work on projects they've
signed deals on. It's already happening.
For many, the job of China expansion is
done. The push into the inland regions
there is proving fnancially unattractive.
Other Asian destinations offer coastal
facilities and in some cases demanding
and growing middle class consumers
on a scale that outstrips the Chinese. A
good indicator of the next big trend in
Asia has often been the big Taiwanese
and Hong Kong companies who, due
to their low value-added, high volume,
low-cost manufacturing, have often
gravitated to the most cost effective
labors pools in the market. In the past,
this has meant China; today it is place
like Vietnam, Thailand, and India. Why,
after all, would you want to locate a new
export manufacturing facility inland in
China and away from the increasingly
expensive coastal cities of Shanghai and
Guangzhou, when you can have exactly
the same plant slap bang on the coast
in Vietnam or India, with an English
speaking workforce and better tax
investment incentives? You wouldn't,
and the savvy American boardrooms
and entrepreneurs know this.
China plus one is the new expansion
strategy for Asia, and corporate America
is picking up on it.
For legal and tax advice in Vietnam,
China, Hong Kong and India please
contact Dezan Shira & Associates
at info@dezshira.com and visit our
website at www.dezshira.com, or view
our specifc other investment magazine
titles for additional information.
+ 1
Vietnam at the crossroads
8 Vietnam Briefng | Spring 2008
Vietnam at the crossroads
infrastructure key to ASEAN development
[ By Andy Scott, Managing Editor, Vietnam Briefng ]
N
early thirty years ago, Dang
Dong sat in the center of an
advanci ng Chi nese ar my.
Infuriated by Vietnam' s invasion of
neighboring Cambodia, China initiated
a short and bl oody i ncursi on i nt o
Northern Vietnam. By the time the
Chinese tanks had retreated, much of
the provinces of Cao Bang, Lao Cai
and Lang Song were in ruins. Today the
two nations consider the region vital
to their economic development, and
the countries are now looking at new
roads and transportation agreements
to not only bring new prosperity to the
region, but further solidify a once icy
relationship.
In 2005 Vietnamese President Tran Duc
Luong and Chinese President Hu Jintao
issued a joint communiqu recognizing
their common goals for expanding
bi l at eral rel at i ons and addressi ng
territorial border issues. The agreement
set the ball rolling for a fve-year plan
that aims to lead to US$15 billion two-
way trade by 2010 under the banner,
two corridors, and one economic belt.
A major part of the corridor is the
recently green lit four-lane highway
link, connecting Hanoi to Kunming
in Southern China's Yunnan province.
The pr oj ect , under wr i t t en by t he
Asi an Devel opment Bank and due
t o be compl et ed by 2012, wi l l cut
t r anspor t at i on t i mes bet ween t he
two cities from the current three-day
journey to a swift nine hours. The
bank approved a US$1.1 billion loan
to finance work on the 245 kilometer
Vietnamese stretch of the highway from
Hanoi to the border at Lao Cai. The
highway designated Asian Highway
14 in Vietnam will link up across the
border with one that is already under
const ruct i on on t he Chi nese si de,
and when completed, give access for
Chinese goods in Southern China to
the Vietnamese port of Haiphong and
increased markets in Southern and
Central China to Vietnamese exporters.
Asian Highway 14 is part of a greater
regional plan by 27 Asian countries
to build a 140,000 kilometer highway
network throughout Asia that meets
uniform standards. In Vietnam, this
i ncl udes ot her rout es t hrough t he
country, connecting the major cities
of Hanoi, Haiphong, Danang and Ho
Chi Minh City to Vietnam's neighbors:
China, Laos and Cambodia.
Vietnam at the crossroads
9 Vietnam Briefng | Spring 2008
One of these routes, the Nanning-Hanoi
corridor that runs through Northeast
Vi et nam and t he Sout her n Chi na
province of Guangxi, was recently
included in the scope of the Greater
Mekong Subregion (GMS) Cross-Border
Transport Agreement. The agreement is
meant to better facilitate cross-border
trade within the six countries linked
by the Mekong River China, Laos,
Myanmar, Thailand, Cambodia and
Vietnam. From single-stop and single-
window customs inspections and cross-
border movement visas to transit traffc
regimes, the agreement streamlines
movement through the regions rapidly
developing trade routes.
China' s new-found ability to invest
in infrastructure outside its borders
is linking the independent economies
together and pushing them towards
a greater regional partnership. The
Association of Southeast Asian Nations
has seen trade between its 10 member
countries and China boom in the last
15 years, growing more than 20 percent
year-on-year to reach US$202.5 billion
in 2007. By 2010 when the China-
ASEAN Free Trade Area is in place,
trade is estimated to increase to US$1.2
t ri l l i on i n an FTA t hat wi l l be t he
world's largest, encompassing around
1.7 billion consumers.
Al l of t hi s t r ade r epr esent s a bi g
opportunity for China. With the advent
of 1999's Go West campaign, Beijing
has been trying to spur development in
its central and western provinces, areas
that have lagged behind the economic
transformations of the country's eastern
coast. This has meant reaching out to
the country's neighbors to the south
and extending its infuence to not only
Vietnam, but also Laos and Cambodia,
two countries with historical ties to
Hanoi. In 2007, China gave US$122
million in foreign direct investment to
Cambodia, representing 22.94 percent
of FDI for the impoverished Southeast
Asian nation. Beijing also spurred
development in Laos, helping complete
the country's section of a Kunming-
Bangkok road system linking China
to Thailand. When completed in 2011,
the road network will give China yet
another trade corridor to the GMS.
China is also helping Laos to construct
a stadium for the upcoming Southeast
Asia Games in 2009. Thousands of
Chi nese l aborers can be found on
the outskirts of the Laotian capital of
Vientiane, brought in by the China
Yunnan Const ruct i on Engi neeri ng
Group Corporation to build the US$80
million stadium.
China's rising influence in the region
has left Hanoi apprehensive and many
within the government see managing
the complicated relationship as the
most important foreign policy issue
for Vietnam' s leadership. Eager to
balance a rising China, Vietnam is also
quietly looking to the United States,
yet another economic giant with which
it shares a long and turbulent history.
More than thirty years after the United
States evacuated Saigon at the end of
the Vietnam War, Washington is again
focusing on building new friendships in
Southeast Asia. And it is China's rising
global economic infuence as opposed to
domino theories and containment that is
the main cause for this renewed interest.
When Assistant Secretary of State
for East Asi an and Paci fic Affai rs
Christopher Hill addressed Congress
last month, he stated that it was in the
United States national interests to stay
involved in Vietnam's transformation.
Hi l l s e e s t he U. S. - Vi e t n a me s e
relationship as evolving, citing broad
progress on economic and health issues
such as avian infuenza and HIV/AIDS.
At a press conference in Hanoi last
month, Hill reiterated that U.S. interest
in the region remained strong. Our
interests in the region here rest on a very
broad base. That is, we're interested
in security relations with countries
here, he said at the March 3 press
roundtable. We're also very interested
in good economic relations and political
relations as well.
Advancing relationships with both
China and the United States will require
del i cat e di pl omat i c maneuver i ng
by Hanoi . Chi na' s r i se has made
strategic shifts by both the smaller
regional powers of Vietnam, Thailand
and Singapore as well as the larger
economic forces of South Korea, Japan
and the United States. Vietnam for its
part is looking to develop itself as a
regional trade center, seeking to play
the United States and Japan off against
China. But for this to happen, it needs
to vastly upgrade its infrastructure.
Vietnam's transportation networks still
lag far behind South China's developed
Pearl River Delta, the country remains
leaps and bounds ahead of its other
two neighbors, and development of
the region remains tied to Hanoi' s
efforts to upgrade and integrate its
own highway systems. Today, China's
economic corridors come to a stop
at t he Vi et namese border, wai t i ng
for j oi nt Chi nese and Vi et namese
construction crews to finish the work
on the Vietnamese side. When they are
complete, another link in the greater
regional trade network will be complete
and Vietnam will have opened up its
doors even more to FDI and foreign
trade. How it handles its neighbor to the
north will not only determine Vietnam's
future, but how the region as a whole is
shaped.
For professional advice and assistance
on s e t t i ng up f ore i gn- i nv e s t e d
e nt e r pr i s e s i n Vi e t nam, pl e as e
contact vietnam@dezshira.com or visit
www.dezshira.com.
The Nanning-Hanoi corridor will become
a major trade route from South China into
Vietnam, but currently only the Chinese side
of the highway is complete.
Much of Vietnam's infrastructure remains
undevel oped and i mprovi ng i t s road
networks will be vital for the future of the
region
VIETNAM BRIEFING
Vietnam Foreign Direct Investment Advice From Dezan Shira & Associates
Complimentary online subscription at www.vietnam-briefng.com Volume I - Number II
Establishing Business
in Vietnam
In This Issue:
Vietnams Corporate and Personal Income Tax Regime
Investment Incentives by Geographical Region
Business Registration Procedures
Doing Business in Vietnam: A Primer
Alberto Vettoretti,
Managing Partner,
Dezan Shira & Associates,
Vice-Publisher,
Vietnam Briefng
Welcome to Vietnam Briefng!
Chris Devonshire-Ellis,
Senior Partner,
Dezan Shira & Associates,
Publisher,
Vietnam Briefng
Welcome to the second issue of Vietnam Briefng. In this issue, we focus on establishing a business in Vietnam,
from the corporate and personal income tax regime, to the various registration procedures foreign investors
must go through to establish a legal entity in the country. We also take a look at the business environment in
Vietnam including what locations provide tax incentives for investment as well as some basic business steps
that should be taken when doing business in the country.

Vietnam Briefng is produced by the Asian business advisory and tax consulting practice Dezan Shira &
Associates, who have a signifcant presence in China, India and Vietnam, providing international investors with
corporate establishment, business and tax advice. Please feel free to contact us at vietnam@dezshira.com or
visit our website www.dezshira.com.
With best regards,
Chris Devonshire-Ellis Alberto Vettoretti
All materials and contents 2008 Asia Briefng Ltd.
No reproduction, copying or translation of materials without prior permission of the publisher. Contact: editor@vietnam-briefng.com
Cover photo by Danny Fay under a creative commons license.
3 Vietnam Briefng | 2008
Vietnams Corporate and Personal Income Tax Regime
Vietnams Corporate and
Personal Income Tax Regime
[ By Hoang Thu Huyen, Manager, Dezan Shira & Associates Hanoi Offce ]
T
ax is never a popular topic,
wherever business is done, but
it is unavoidable. As the current
system in Vietnam is in a process of
transition, every foreign investor needs
to understand what their liabilities are,
both as an individual and a business,
and whether they are eligible for any
relief or exemptions.
Tax planning is a complicated matter
as the tax regime levies different taxes,
and at different tax rates, depending
on location and scope of business.
Tax planning is an integral part of
the business establishment process
and should be done as part of pre-
incorporation and planning stages. It
is vital that detailed attention is paid to
Vietnams taxes and how they affect a
proposed investment.
When structuring investment, detailed
at t ent i on al so needs t o be pai d t o
corporate income tax, value added tax,
personal income tax, and other business
taxes. This article is aimed to provide
the latest Vietnamese tax laws which
will be mostly valid from the beginning
of 2009.
Corporate income tax
A new Corporate Income Tax Law
was approved by Vietnams National
Assembly on June 3, 2008 and will be
applicable starting January 1, 2009.
The key change in the new law is the
reduction of the standard corporate
income tax (CIT) rate from 28 percent
to 25 percent in an effort to ensure that
Vietnam continues to be regionally and
globally competitive.
In addition to the standard CIT rate,
the government will also grant tax
incentives for investment projects
implemented in specific sectors and
areas across the country. The revised
incentive regime is less favorable than
the current one because it only provides
two preferential tax rates10 percent
and 20 percentand removes the 15
percent rate. The tax incentives under
the new law are as follows:
The tax incentives above apply from the
year revenue is generated. Currently,
the tax exemption is applicable from a
business frst proftable year.
These changes wi l l al so appl y for
existing taxpayers who havent started
to use their tax incentives. For example,
tax exemptions will still be pending if a
taxpayer has not yet generated a proft.
The effective date of the law on January
1, 2009 will trigger the tax exemption
and reduction period.
Under the new law, there are no tax
exemptions or reductions for business
expans i on, but onl y accel er at ed
depreciation. The tax exemption and
reduction for relocated enterprises has
also been removed.
Incentive Additional incentives Benefciaries
20% tax rate
s hal l appl y
for ten years
CIT exemption: up to two years
CIT reduction of 50% for up to four
subsequent years
A newly established company founded in a region included on the list of
geographical areas with diffcult socio-economic conditions (please see page 6 for a
list investment incentives by geographical region).
10% tax rate
shall apply for
ffteen years
CIT exemption: up to four years
CIT reduction of 50% for up to nine
subsequent years
A newly established company founded in a region included on the list of
geographical areas with extremely diffcult socio-economic conditions (please see
page 6 for a list investment incentives by geographical region), economic zones,
high-tech zones.
A newly established company investing in the high-tech sector, producing software,
scientifc research and technology development, or investing in the development of
infrastructure deemed extremely important by the state.
A newly established company operating in industries such as educational training,
vocational training, health care, culture, sports and the environment.
4 Vietnam Briefng | 2008
Vietnams Corporate and Personal Income Tax Regime
The corporate income tax law has a
general deductibility clause that allows
expenses to be deductible if they are:
properly substantiated, related to the
production or trading of an enterprise,
and are not specifically identified as
being non-deductible.
However, t he l aw wi l l r et ai n t he
10 percent cap on advert i si ng and
promotional expenses.
If a taxpayer company has branches
in various provinces, then they will be
required to allocate the tax payment
to the corresponding provincial tax
authorities in the locations where it
operates.
The new law also introduces a new
provision pertaining to a company's
r es ear ch and devel opment f und.
Companies will be allowed to set aside
a maxi mum of 10 percent of t hei r
annual taxable incomes for research and
development only if it is spent in the
country.
Companies will be given five years
to use the fund. If the research and
development fund is not used within
that time or less than 70 percent of it is
spent or it is used for another purpose
other than research and development
then the company will have to refund
the tax exemptions garnered from the
fund plus interest.
The period of loss carry forward will
remai n fi ve years. However, l oss
incurred from the transfer of immovable
property can only be compensated by
income derived from the same business
activity.
Value added tax
Value added tax (VAT) is levied on
goods and services generated during
the process of production, circulation
and consumption in Vietnam, including
goods and services purchased from
abroad.
The new VAT law, effective from Jan.
1, 2009, will see VAT applied at the tax
rates of 0, 5, and 10 percent. The tax
rate of 0 percent is applicable to goods
for export, excluding international re-
insurance, international credit services,
international financial investment, and
international stock investment.
The international transportation service
current l y t reat ed as t ax-exempt i s
subject to 0 percent VAT under the new
law. On the other hand, the 5 percent
tax rate is applicable to essential goods
and services such as water, fertilizer,
insecticides, medicine, educational and
training equipment and tools, baby toys,
scientific and art books, natural agro-
forestry products, animal feeds, and
services for scientific and agricultural
applications. The standard tax rate of 10
percent is applicable to everything else
Under the new VAT law, there will be
no exemption on imported assets such
as equipment, machinery, transport
and construction materials unless the
goods are used for scientific research,
technological development, oil and gas
exploration and exploitation activities.
The new law also treats derivative
financial transactions as tax-exempt
supplies, which were not previously
regulated in the current law.
Compani es wi l l now be gi ven an
allowance of six months to correct
errors in declaration and deduction
of input VAT instead of the previous
three months. In addition, expenses
amounting to more than VND20 million
must be made through bank system for
the input VAT to be credited under the
new law.
Personal income tax
T h e Vi e t n a me s e g o v e r n me n t
has r el eas ed det ai l s of t he new
personal income tax (PIT) law and
i t s accompanyi ng r egul at i ons on
registration and declaration. The new
law applies to individuals earning
income, including business individuals
who were previously included under the
CIT.
The PIT law is set to take effect on Jan.
1, 2009, when individuals with taxable
earnings will be granted a tax code.
The law says that individuals are either
non-residents or residents. Residents
are defined as those living in Vietnam
for 183 days or more in a 12 month
period, regardless of their nationality.
These include those having a residential
location in Vietnam that includes a
rented house. Non-residents are those
who do not qualify to the conditions set
above.
The personal income tax is levied on
10 types of earnings: earnings from
business activities; wages received from
employers; capital investment; capital
transference; property transference;
prizes won; copyright; commercial
franchising; income from securities such
as inheritance; and capital contribution
in economic institutions and business
facilities.
Ear ni ngs exempt ed f r om t he PI T
i ncl ude: i ncome f r om r eal est at e
transference between husbands and
wives; biological parents and children
including siblings; earnings from life
insurance contracts; overseas remittance;
retirement salary; scholarship money;
and earnings from compensation for
insurance contracts.
The progressive tax benchmark for
residents employment income will
be classified under seven tax grades.
The lowest tax grade, for those with
5 Vietnam Briefng | 2008
Vietnams Corporate and Personal Income Tax Regime
a monthly taxable income of VND5
million or less, will be 5 percent while
those earning VND5-10 million will be
taxed 10 percent.
The highest tax bracket will be levied
at 35 percent on taxable income in
excess of VND80 million a month. The
rates are in line with the existing rates
applicable to foreigners, although the
top 40 percent rate is replaced with 35
percent.
Ther e wi l l be a t ax r educt i on of
VND4 million per month or VND48
million annually for taxpayers. The
tax reduction for each dependant is
pegged at VND1.6 million per month or
VND19.2 million annually.
Qualifed dependents are children aged
below 18 years old, children over 18
years old but earning a low income,
and disabled parents. Non-residents are
taxable on employment income at a fat
rate of 20 percent, a decrease from the
previous rate of 25 percent.
One of important changes under the
new law is the fat tax rates applied for
investment income.
Non-resi dent s are al so t axabl e on
interest and dividends at 5 percent.
It is still not clear whether this will
be implemented via a withholding
obligation imposed on the income
payers or something that non-residents
will have to pay directly. As for gains
on sale of assets by non-residents, it will
be taxed at fat rates applicable to gross
sales proceeds.
For more information or if you need
advi se on corporat e and personal
income taxes matters in Vietnam, please
contact Dezan Shira & Associates at
vietnam@dezshira.com or visit www.
dezshira.com.
Tax
bracket
Yearly taxable
income
(million VND)
Monthly
taxable
income
(million VND)
Tax
rate
(%)
1 Up to 60 Up to 5 5
2 Over 60 to 120 Over 5 to 10 10
3 Over 120 to 216 Over 10 to 18 15
4 Over 216 to 384 Over 18 to 32 20
5 Over 384 to 624 Over 32 to 52 25
6 Over 624 to 960 Over 52 to 80 30
7 Over 960 Over 80 35
Taxable income Rate (%)
Residents Non-
residents
Interest 5 5
Dividends 5 5
Inheritances 10
Sale of securities
On the gain 20 0.1
On the sales proceeds 0.1 0.1
Sale of real estate
On the gain 25 2
On the sales proceeds 2 2
INVESTMENT INCENTIVES BY GEOGRAPHICAL REGION
6 Vietnam Briefng | 2008
Ha Giang
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Cao Bang
Lai Chau
Son La Quang Ninh
Nghe An
Ha Tinh
Quang Binh
Quang Tri
Danang
Quang Nam
Quang Ngai
Binh Dinh
Gia Lai
Phu Yen
Dak Lak
Lam Dong Ninh Thuan
Binh Thuan
Ba Ria - Vung Tau
15
16
17
18
19
20
21
22
23
24
Kien Giang
Ca Mau
Khanh Hoa
Thua Thien - Hue
Lao
Cai
Dien
Bien
Yen
Bai
Hoa
Binh
Thanh
Hoa
Kon
Tum
Dak
Nong
Binh
Phuoc
Tay
Ninh
Dong
Nai
An
Giang
Bac
Lieu
Soc
Trang
Tuyen
Quang
Bac
Kan
Lang
Son
Ordinal
number
Province Areas with extremely diffcult socio-economic
conditions
Areas with diffcult socio-economic
conditions
1 Bac Kan All districts and towns
2 Cao Bang All districts and towns
3 Ha Giang All districts and towns
4 Lai Chau All districts and towns
5 Son La All districts and towns
6 Dien Bien All districts and Dien Bien city
7 Lao Cai All districts Lao Cai City
8 Tuyen Quang Na Hang and Chiem Hoa districts Ham Yen, Son Duong and Yen Son districts and
Tuyen Quang town
9 Bac Giang Son Dong district Luc Ngan, Luc Nam, Yen The and Hiep Hoa districts
10 Hoa Binh Da Bac and Mai Chau districts Kim Boi, Ky Son, Luong Son, Lac Thuy, Tan Lac,
Cao Phong, Lac Son and Yen Thuy districts
11 Lang Son Binh Gia, Dinh Lap, Cao Loc, Loc Binh, Trang Dinh, Van Lang
and Van Quan districts
Bac Son, Chi Lang and Huu Lung districts
12 Phu Tho Thanh Son and Yen Lap districts Doan Hung, Ha Hoa, Phu Ninh, Song Thao, Thanh
Ba, Tam Nong and Thanh Thuy districts
Investment incentives
by geographical region
1. Phu Tho
2. Ha Tay
3. Vinh Phuc
4. Thai Ngyuen
5. Hanoi
6. Bac Ninh
7. Bac Giang
8. Hai Durong
9. Haiphong
10. Thai Binh
11. Hung Yen
12. Ha Nam
13. Nam Dinh
14. Ninh Binh
15. Binh Durong
16. Ho Chi Minh City
17. Long An
18. Dong Thap
19. Tien Giang
20. Ben Tre
21. Tra Vinh
22. Vinh Long
23. Hau Giang
24. Can Tho
INVESTMENT INCENTIVES BY GEOGRAPHICAL REGION
7 Vietnam Briefng | 2008
Ordinal
number
Province Areas with extremely diffcult socio-economic
conditions
Areas with diffcult socio-economic
conditions
13 Thai Nguyen Vo Nhai anh Dinh Hoa districts Dai Tu, Pho Yen, Phu Luong, Phu Binh and Dong
Hy districts
14 Yen Bai Luc Yen, Mu Cang Chai and Tram Tau districts Tran Yen, Van Chan, Van Yen and Yen Binh districts
and Nghia Lo town
15 Quang Ninh Ba Che and Binh Lieu districts, Co To island district, islands
and offshore islands under provincial authority
Van Don district
16 Haiphong Bach Long Vy and Cat Hal island districts
17 Ha Nam Ly Nhan and Thanh Liem districts
18 Nam Dinh Giao Thuy, Xuan Truong, Hai Hau and Nghia Hung
districts
19 Thai Binh Thai Thuy and Tien Hai districts
20 Ninh Binh Nho Quan, Gia Vien, Kim Son, Tam Diep and Yen
Mo districts
21 Thanh Hoa Muong Lat, Quan Hoa, Ba Thuoc, Lang Chanh, Thuong Xuan,
Cam Thuy, Ngoc Lac, Nhu Thanh and Nhu Xuan districts
Thach Thanh and Nong Cong districts
22 Nghe An Ky Son, Tuong Duong, Con Cuong, Que Phong, Quy Hop, Quy
Chau and Anh Son districts
Tan Ky, Nghia Dan and Thanh Chuong districts
23 Ha Tinh Huong Khe, Huong Son and Vu Quang districts Duc Tho, Ky Anh, Nghi Xuan, Thach Ha, Cam
Xuyen and Can Loc districts
24 Quang Binh Tuyen Hoa, Minh Hoa and Bo Trach districts Other districts
25 Quang Tri Huong Hoa and Dac Krong districts Other districts
26 Thua Thien Hue A Luoi and Nam Dong districts Phong Dien, Quang Dien, Huong Tra, Phu Loc and
Phu Vang districts
27 Danang Hoang Sa island district
28 Quang Nam Dong Giang, Tay Giang, Nam Giang, Phuoc Son, Bac Tra My,
Nam Tra My, Hiep Duc, Tien Phuoc and Nui Thanh districts
and Cu Lao Cham island
Dai Loc and Duy Xuyen districts
29 Quang Ngai Ba To, Tra Bong, Son Tay, Son Ha, Minh Long, Binh Son and
Tay Tra districts and Ly Son island district
Nghia Hanh and Son Tinh districts
30 Binh Dinh An Lao, Vinh Thanh, Van Canh, Phu Cat and Tay Son districts Hoai An and Phu My districts
31 Phu Yen Song Hinh, Dong Xuan, Son Hoa and Phu Hoa districts Song Cau, Tuy Hoa and Tuy An districts
32 Khanh Hoa Khanh Vinh and Khanh Son districts, Truong Sa island district
and islands under provincial management
Van Ninh, Dien Khanh and Ninh Hoa districts and
Cam Ranh town
33 Ninh Thuan All districts
34 Binh Thuan Phu Quy island district Bac Binh, Tuy Phong, Duc Linh, Tanh Linh, Ham
Thuan Bac and Ham Thuan Nam districts
35 Dak Lak All districts
36 Gia Lai All districts and towns
37 Kon Tum All districts and towns
38 Dak Nong All districts
39 Lam Dong All districts Bao Loc town
40 Ba Ria - Vung Tau Con Dao island district Tan Thanh district
41 Tay Ninh Tan Bien, Tan Chau, Chau Thanh and Ben Cau districts Other districts
42 Binh Phuoc Loc Ninh, Bu Dang and Bu Dop districts Dong Phu, Binh Long, Phuoc Long and Chon Thanh
districts
43 Long An Duc Hue, Moc Hoa, Tan Thanh, Duc Hoa, Vinh
Hung and Tan Hung districts
44 Tien Giang Tan Phuoc district Go Cong Dong and Go Cong Tay districts
45 Ben Tre Thanh Phu, Ba Chi and Binh Dai districts Other districts
46 Tra Vinh Chau Thanh and Tra Cu districts Cau Ngang, Cau Ke and Tieu Can districts
47 Dong Thap Hong Ngu, Tan Hong, Tam Nong and Thap Muoi districts Other districts
48 Vinh Long Tra On district
49 Soc Trang All districts Soc Trang town
50 Hau Giang All districts Vi Thanh town
51 An Giang An Phu, Tri Ton, Thoai Son, Tan Chau and Tinh Bien districts Other districts
52 Bac Lieu All districts Bac Lieu town
53 Ca Mau All districts Ca Mau city
54 Kien Giang All districts, islands and offshore islands under provincial
management
Ha Tien and Rach Gia towns
Other localities High-tech parks and economic zones entitled to preferences
under establishment decisions of the prime minister
Industrial parks established under decisions of the
prime minister
Registering Businesses in Vietnam
8 Vietnam Briefng | 2008
Registering Businesses
in Vietnam
[ By Hoang Thu Huyen, Manager, Dezan Shira & Associates Hanoi Offce ]
F
or the frst time, foreign investors
investing in Vietnam must have a
legitimate investment project and
perform the procedures for investment
registration or evaluation of investment
at the state administrative body for
investment in order to be issued with an
investment certificate. The investment
certificate is now also the business
registration certifcate.
Project classification and
licensing agencies
Investment projects are classified into
three groups, with various approving
and licensing agencies.
All special projects and conditional
projects, regardless the size of the
investment capital shall be all subject to
the project appraisal process. Regarding
non-conditional projects, the project
appraisal procedures shall be applicable
for projects having more than VND300
billion (about US$18.1 million), while
the simpler investment registration shall
be required to projects having less than
VND300 billion.
Appl i cati on document
requirements
An applicant must file the following
documents to the appropriate investment
registration agencies:
application for investment certifcate
business cooperation contract (BSC)
or joint venture contract, as the case
may be
charter of limited liability company
(LLC) or joint stock company (JSC),
as the case may be
technical-economic explanation or
feasibility study for a BCC, LLC or
JSC
statements certifying the legal status
and fnancial capacity of investors
In addition, the following papers are
also required:
draft technology transfer contract or
technical assistance contract
environmental impact assessment
report
application file for land lease or in-
principle agreement on premise lease
p l a n n i n g c e r t i f i c a t e a n d t h e
preliminary design indicating the
proposed architecture of the project
The number of sets of application fles
to be submitted to the state agencies is
as follows:
special projects for which the prime
minister approves the investment
policy require ten sets of application
files, including at least one original
set
pr oj ect s out s i de EPZs and I Zs
require eight sets of application fles,
including at least one original set
projects inside EPZs and IZs require
four sets of application fles, including
at least one original set
Vietnamese is lawfully required, but a
widely-used foreign language (French,
English, Russian) may also be used. In
principle, the two languages have equal
legal validity in determining the parties'
intentions.
Licensing procedures and
timing
Proj ect s subj ect t o i nvest ment
appraisal procedures
Regarding projects for which the prime
minister approves the investment policy,
the appropriate filing agencies have to
Filing agency Approving agency Licensing agency
S p e c i a l
projects
( s e e s p e c i a l
p r o j e c t s
section)
Provincial Department of
Planning and Investment
Prime Minister Ci t y/ pr ovi nce- l evel
Peopl es Commi t t ee
o r M a n a g e m e n t
commi t t ees of EPZs
and IZs based on the
location of projects
Other projects
outside export
p r o c e s s i n g
zones (EPZs)
and industrial
zones (IZs)
Provincial Department of
Planning and Investment
Provincial Peoples
Committee
Pr ovi nci al Peopl es
Committee
Other projects
i ns i de EPZs
and IZs
Management committees
of EPZs and IZs
M a n a g e m e n t
c o mmi t t e e s o f
EPZs and IZs
M a n a g e m e n t
commi t t ees of EPZs
and IZs
Registering Businesses in Vietnam
9 Vietnam Briefng | 2008
get opinions from different authorities
before making an examination report
and submitting to the prime minister for
decision on the investment policy. The
time limit for issuance of an investment
registration certifcate is legally within
37 working days from receipt of the
completed fles.
Regardi ng proj ect s for whi ch t he
Provincial Peoples Committee makes
decision about granting the investment
cert i fi cat e, t he appropri at e fi l i ng
agencies have to get authorization from
various officials before making an
examination report and submitting it to
the Provincial Peoples Committee for
decision. The time limit for issuance of
an investment registration certifcate is
legally within 25 working days from
receipt of the fles.
Regardi ng proj ect s for whi ch t he
management committees of EPZs and
IZs make decision about granting the
investment certifcate, they have to get
authorization from various officials
before maki ng deci si on. The t i me
limit for issuance of an investment
registration certificate shall be legally
within 20 working days from receipt of
the fles.
Other projects
Wi t hi n 15 worki ng days from t he
date of receipt of the valid investment
registration applications, the investment
cer t i f i cat e- gr ant i ng agency shal l
check the validity of the investment
registration application and grant an
investment certifcate.
List of conditional
Investment sectors
applicable to foreign
investors
broadcasting and television.
p r o d u c t i o n , p u b l i s h i n g a n d
distribution of cultural products.
expl oi t at i on and pr ocessi ng of
minerals.
est abl i shment of i nfrast ruct ures
for telecommunications networks,
transmission and provision of Internet
and telecommunications services.
est abl i shment of publ i c post al
networks and provision of postal
services and delivery services
construction and operation of river
ports, seaports, airports and airfelds
t r a n s p o r t a t i o n o f g o o d s a n d
passengers by rail, air, land and sea
and inland waterways
catching of marine resources
production of cigarettes
real estate business
investment in import, export and
distribution.
education and training.
hospitals and clinics.
other investment domains in treaties
to which Vietnam is a contracting
party and which restrict the opening
of the market to foreign investors
Investment conditions applicable to
forei gn i nvest ors wi t h i nvest ment
projects in the sectors specified above
mus t conf or m t o t he pr ovi s i ons
of t r eat i es t o whi ch Vi et nam i s a
contracting party.
For more information or assistance with
registering a business in Vietnam, please
contact Dezan Shira & Associates
at vietnam@dezshira.com or visit
www.dezshira.com.
Special projects
Projects for which the prime minister
approves the investment project:
I nves t ment pr oj ect s i n t he
following domains, irrespective
of the source of capital and the
scale of investment:
building and commercial operation
of airports; transportation by air
building and commercial operation
of national seaports
exploration and processing of
oil and gas; exploration for and
exploitation of minerals
radio and television broadcasting
casino business
production of cigarettes
establishment of university-level
training establishments
establishment of industrial parks,
export processing zones, high-tech
parks and economic zones
Investment projects other than
those defined above, regardless
of the source of capital, and
having an investment capital of
VND1,500 billion or more in the
following sectors:
el ect r i ci t y busi ness; mi ner al
processing; metallurgy
bui l di ng of rai l way, road and
inland waterway infrastructure
production and business of alcohol
and beer
Foreign investment projects in
the following sectors:
ocean shipping
establishment of networks for
and provision of postal, delivery,
telecommunications and internet
services; establishment of wave
transmission networks
press printing and distribution;
publishing
est abl i shment of i ndependent
scientifc research institutions.
Doing Business in Vietnam: A Primer
10 Vietnam Briefng | 2008
Doing Business in
Vietnam: A Primer
[ By Joyce Roque, Editor, Vietnam Briefng ]
A
ccording to a report by the
Economist Intelligence Unit,
Vietnam climbed six spots
to 65th place in terms of improving
business environment out of the 82
countries surveyed.
The report said that Vietnam's climb
was due to its membership to the World
Trade Organization that should help
develop its business environment and
liberalize trade. In the coming years,
Vietnam is expected to improve its
operating environment for private
enterprises in line with new legislation,
and event ual l y more st at e-owned
enterprises will implement reforms and
be equitized.
By Jan. 1, 2009, the new personal
income tax system will tax foreign
workers and locals at the same rates.
Currently, the tax threshold for foreign
staff is more than half as much again as
that of Vietnamese employees.
In addition, following Vietcombank, one
of four biggest state-owned commercial
banks which was equitized at the end
of 2007, other state-owned commercial
banks will be reformed by 2009, and
restrictions on foreign banks will be
reduced. At the moment, three foreign
banks have been granted licences to
open fully-owned banks in Vietnam,
including HSBC, Standard Chartered
and ANZ.
Vietnam remains attractive for foreign
investors because it is an emerging
mar ket t hat off er s oppor t uni t i es
for expansion and sales. Vietnams
economic growth rate has been among
the highest in the world, expanding
annually at 7 to 8.5 percent, while
industrial production has been growing
at around by 14 to15 percent annually.
Amid fears of a global downturn, the
real GDP growth is expected to decrease
to 5.3 percent in 2009 although foreign
investor confdence in the country is not
expected to erode because of Vietnams
long term prospects to develop low cost
labor and infrastructure.
A foreign investor looking into entering
the Vietnamese market must be prepared
to put in the effort to fy into the country
and conduct their own due diligence
before committing to any business.
Those who do their homework, follow
the rules and conduct primary research
will have their efforts rewarded in
the end. Patience is the key word to
remember when choosing to set-up
business in an emerging economy such
as Vietnam.
Si nce Vi et nams l egal s ys t em i s
not computerized, due diligence on
litigation and criminal records of a
potential local partner will take longer.
A forei gn i nvest or must consi der
seeking the advice of Vietnam experts,
local researchers and analysts, industry
groups, and embassies while also double
checking with the media and internet.
It is also necessary to get in touch with
party, military, and local committees in
the area where the potential business
partner holds its main offces.
It i s advi sabl e t o ask for a l i st of
cust omer s and suppl i er s t hat ar e
currently in business with the potential
local partner. Verifying this list will
allow an investor to have a clear picture
of the local partners integrity.
The national standard of communication
in the country is Vietnamese. English
is still not widely-used. All formal
d o c u me n t s mu s t b e wr i t t e n i n
Vietnamese along with an additional
document translated in your language
of choice. A foreign investor is advised
to secure the services of a qualified
translator that should be at hand during
business meetings.
Take care not to schedule your trip on
any of Vietnams public holidays. The
most important holiday in the country is
the Lunar New Year or Tet Holiday that
usually falls between January 20 and
February 20. The holiday lasts for one
week during which time, business and
government transactions come to a halt.
There are two types of companies in
Vietnam:
state-owned companies
p r i v a t e l y - h e l d a n d o p e r a t e d
companies
Foreign investors will have to deal with
the local Peoples Committee, which
manages city and district investments
and pr oj ect s or t he management
committee of export processing zones
and industrial zones depending on the
location of their projects. For some
special projects, the prime minister is
required to give the final approval for
foreign investments.
Business in the country is still best done
face-to-face and rarely over the phone
or via the internet. Local businessmen
are unlikely to trust someone they have
never met in person. The Vietnamese
Doing Business in Vietnam: A Primer
11 Vietnam Briefng | 2008
still believe in the proverb which says:
looking at a face to catch its mind.
Even more important, is getting in touch
with the right people. A prospective
investor should ask for names from the
central and local government agencies.
Introductions to the right business
contacts can also be obtained through
networking with local businessmen and
other foreign investors in the area.
Take note that few frms in the country
are audited following international
standards. Financial information on
private firms may not detail assets,
liabilities and sources of company
funding. This should change in a few
years time as more companies list in
Vietnams fledging stock market and
the business environment becomes
developed.
There is only one credit information
resource in the country, the Credit
Information Center, which is managed
by t he St at e Bank of Vi et nam. In
addi t i on, Vi et nams publ i c credi t
registry does not include information on
small SMEs, consumer loans, and other
credit providers.
Usual l y busi ness meet i ngs i n t he
country are booked 7 to 10 days in
advance. It would be wise to send a
letter to the company that details your
companys information, how you came
to know of them, and the purpose of the
meeting. On the day of the meeting, be
punctual as the Vietnamese value time.
Arriving late for a meeting may be seen
as disrespectful; the Vietnamese are
heavily-infuenced by Confucianism and
therefore value respect and courtesy.
On the initial meeting, gifts are not
needed. Token gifts will only be usually
exchanged when both parties have
agreed on the terms and are proceeding
with the business partnership.
Vietnamese are known to be tough
negotiators with a penchant for doing
things in a less legalistic manner. A
general rule for drawing up contracts is
that they should be easy to understand,
short and precise. Company lawyers
usually work behind the scenes and do
not take part in negotiations.
The contract should stipulate a clause
for set t l i ng di sput es. Vi et nam has
only one such organization for foreign
investment, the Vietnam International
Arbitration Center. The office has
jurisdiction for arbitrations that arise
from economic international relations
like foreign trade contracts, investments,
tourism and international transport and
works under the Vietnam Chamber of
Commerce and Industry. It also provides
a list of Vietnamese arbitrators and can
process arbitration written in English,
French or Russian.
At this stage of negotiations, a foreign
investor will come to rely heavily on the
help of their translator. The translator
shoul d be abl e t o revi ew t hat t he
contract corresponds to the terms agreed
upon during the meetings.
There is a possibility that the Vietnamese
party may change their mind and revise
the terms of an agreement even though
it was already agreed and signed upon.
This is a common Vietnamese business
practice given that most Vietnamese
busi nessmen are st i l l not adept at
conducting international negotiation
process. More so when dealing with
state-owned companies and government
agencies that usually processes contracts
through consensus with all the major
players in the organization.
Regulatory and commercial laws in the
country are in still in a state of fux and
foreign investors will have to have to
also deal with overlapping jurisdiction
among government ministries. This
often leads to a lack of transparency,
uniformity and consistency in policies
and commercial projects.
For more information or assistance
with doing business in Vietnam, please
contact Dezan Shira & Associates at
vietnam@dezshira.com or visit www.
dezshira.com.
VIETNAM BRIEFING
Vietnams
Industrial Zones
In This Issue:
Foreign Investment in Vietnam's Industrial Zones
Investment Incentives
Industrial Zones in Haiphong, Danang, Ba Ria-Vung Tau and Ho Chi Minh City
Sectors Entitled to Investment Incentives
The Practical Application of Vietnam Business
Daily Business News Available at
www.vietnam-briefng.com/news Volume II - Number I
Haiphong

Danang
Ba Ria-Vung Tau

Ho

Chi Minh City
This issues cover photo by Lucas Jans is of traditional Vietnamese wedding cakes Phu The (Phu means man, The means woman) wrapped in palm leaves in a Hue
market. Mr. Jans works for the Village School Foundation in Vietnam, a non-proft organization that creates educational opportunities for poor families in Vietnam by
constructing new schools and providing tuition grants to underprivileged children. For more information, please visit www.vsfoundation.com or email Mr. Jans at
lucas@vsfoundation.com.
I
n this issue of Vietnam Briefng, we look at Vietnams industrial zones. Set up to cater to industrial manufacturing, these zones
provide foreign investors with incentives and preferential policies not found in other parts of Vietnam. It is these policies that can
make investing in the country advantageous for those looking for inexpensive manufacturing locations in Asia. We provide a run-down
of investment incentives for foreign investors in these zones, and then take an in-depth look at four important areas of Vietnam and
the investment zones present there. These areas include Haiphong, Northern Vietnams only large deep-water port, Danang in Central
Vietnam, Ba Ria-Vung Tau in Southern Vietnam, and Ho Chi Minh City, the commercial center of the country.
The articles in this issue of Vietnam Briefng were researched and written with the help of the Vietnam-based foreign direct investment
and tax consultancy Dezan Shira & Associates. Please contact them directly through their primary offces in Hanoi, and feel free to
sign up for our regular Vietnam Briefng bulletins and regular magazine as featured on the Vietnam Briefng web site. We look forward
to hearing from you.
With best regards,
Andy Scott
Managing Editor, Vietnam Briefng
Welcome to Vietnam Briefng!
All materials and contents 2009 Asia Briefng Ltd.
No reproduction, copying or translation of materials without prior permission of the publisher. Contact: editor@vietnam-briefng.com
3 Vietnam Briefng | 2009
Industrial Zones in Vietnam
Industrial Zones in Vietnam
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
B
y the end of 2008, Vietnam had
a total of 219 industrial zones
wi t h a nat ural l and area of
61,472.4 hectares throughout 54 cities
and provinces nationwide. Of which,
the industrial land area planned for
leasing was nearly 40,000 hectares, or
65 percent of total industrial land.
In Vietnam, the industrial zone is a zone
which specializes in manufacturing
i ndust ri al product s and provi di ng
services for industrial manufacturing.
They have def i ned geogr aphi cal
boundaries as established in accordance
with government regulations and often
provide investment incentives.
In 2008 alone, there were 40 newly
established industrial zones with a total
natural land area of 15,675 hectares (an
increase of 73 percent over 2007), and
eight industrial zones expanded by a
total natural land area of 2,810 hectares
(increasing by 41 percent compared to
2007). 2008 was marked as the year
when the most number of industrial
zones were newly set up and expanded
over the last 17 years.
In t hi s i ssue of Vi et nam Bri efi ng,
we take a look at some of the more
i mpor t ant i ndust r i al zones, t hei r
locations, and the incentives they can
provide to foreign investors.
Most of the industrial zones in Vietnam
are concentrated in three key economic
regions, the North, the Central and the
South of Vietnam:
The key northern economic region
includes seven cities and provinces:
Hanoi, Haiphong, Quang Ninh, Hai
Duong, Hung Yen, Vinh Phuc and
Bac Ninh
The key central economic region
includes seven cities and provinces:
Danang, Thua Thien Hue, Quang
Nam, Quang Ngai and Binh Dinh
The key southern economic region
includes seven cities and provinces of
Ho Chi Minh City, Dong Nai, Ba Ria-
Vung Tau, Binh Duong, Tay Ninh,
Binh Phuoc and Long An
By the end of 2008, these three key
economic regions had 149 industrial
zones with the total natural land areas
of 49,232 hectares, accounting for 68
percent of the total number of industrial
zones, and 81 percent of their total
natural land areas.
However, out of the 219 industrial
zones nationwide, only 118, or 54
percent, are operational. The remaining
101 industrial zones, most of which
were established in 2007 and 2008, are
still in the process of developing their
infrastructure and have yet to see any
investors move in. At the end of 2008,
the total leased land area accounted for
14,904 hectares, or 64 percent of the
total industrial land area.
According to plans approved by the
prime minister, by 2015 Vietnam will
add 91 newly established industrial
zones with the total area of 20,839
hectares, and 22 expanded industrial
zones wi t h t he t ot al area of 3, 543
hectares. This will increase the countrys
total industrial land by 24,381 hectares.
Industrial Zones
Ho Chi Minh City
Haiphong
Danang
Ba Ria-Vung Tau Province
4 Vietnam Briefng | 2009
Industrial Zones in Vietnam
Foreign direct investment
in industrial zones
By the end of 2008, all the industrial
zones nationwide had attracted 3,564
FDI projects with a total registered
investment capital of US$42.67 billion.
In 2008 al one, i ndust ri al zones i n
attracted registered FDI capital of
US$12.79 billion, including 540 new
projects with a total capital of US$10.45
billion and 537 capital-increasing
projects worth more than US$2. 34
billion.
Ba Ri a-Vung Tau was t he l eadi ng
province in terms of foreign investment
in 2008, receiving US$4.5 billion. It
was followed by Bac Ninh province
(US$1.14 billion) in the North, Binh
Duong Province (US$1.08 billion) and
Dong Nai Province (US$1.01 billion) in
the South.
Compared to the above committed
fgures, by the end of 2008, there were
a total of 2,250 FDI projects worth
US$16.2 billion coming into operation,
accounting for 38 percent out of total
registered investment capital. In which,
for 2008, the disbursement was US$2.5
billion.

Incentives for investors in
industrial zones
In an effort to improve historically poor
areas of the nation, the Vietnamese
government promulgated investment
incentives for special designated regions
with diffcult socioeconomic conditions.
Because industrial zones in Vietnam
are able to clasify themselves like a
region with difficult conditions, they
beneft from the same incentives, which
include preferential land, tax and labor
policies.
Investors with projects in industrial
zones, even i f i t i s an expansi on
project, are entitled to enjoy investment
advantages in the following manner:
(i) Invest ment proj ect s i n sect ors
listed as being entitled to special
investment preferences will qualify
f or i ncent i ves i f t he pr oj ect s
are i mpl ement ed i n areas wi t h
difficult or extremely difficult
socioeconomic conditions
(ii) Investment projects in sectors listed
as being entitled to investment
preferences and projects located
in industrial zones will qualify
f or i ncent i ves i f t he pr oj ect s
are i mpl ement ed i n areas wi t h
difficult or extremely difficult
socioeconomic conditions
Details of these investment preferences
are as follows:
Land
Land rents shall be exempt from the
date of project operation, specifcally in
the following cases:
(i) Seven years for investment projects
in geographical areas with diffcult
soci oeconomi c condi t i ons or
projects on the list of domains
ent i t l ed t o speci al i nvest ment
preferences
(ii) El even year s f or i nves t ment
projects in geographical areas with
extremely difficult socioeconomic
conditions or projects on the list
of domains entitled to investment
preferences which are executed in
areas with difficult socioeconomic
conditions
(iii) Fifteen years for projects on the list
of domains entitled to investment
preferences which are executed in
geographical areas with extremely
diffcult socioeconomic conditions
The lists of geographical areas with
difficult socioeconomic conditions
and areas with extremely difficult
socioeconomic conditions can be found
in the winter 2008 issue of Vietnam
Briefng.
A list of sectors entitled to investment
preferences can be found on pages
10 and 11. A complete list of sectors
including those entitled to special
investment preferences can be found at
www.vietnam-briefng.com.
Taxes
(i) Corporate income tax
Incentives in tax rate: 10 percent tax
rate (instead of 25 percent standard
rate) shall apply for 15 years. The
above tax incentive will apply from
the year in which revenue is generated
Incent i ves i n t ax exempt i on and
reduction: tax exemption will be
applied for a maximum four years;
and a 50 percent tax reduction will be
applied to income tax payable for a
maximum period of nine subsequent
years; the above tax incentives will
apply from the year in which taxable
income arises; in case businesses do
not have taxable incomes in the frst
three years since the year in which
revenue is generated, then the tax
exemption and reduction will be
applied from the fourth year.
The cost of building, maintaining or
renting apartments and infrastructure
buildings in order to serve laborers
wor ki ng i n i ndus t r i al zones i s
deducted when calculating the income
tax of enterprises
(ii) Personal income tax
A 50 percent reduction in personal
income tax is given to Vietnamese
and foreign employees working in
industrial zones
Labor
Foreigners and overseas Vietnamese
who work, i nvest and do busi ness
in industrial zones, and their family
members are granted visas for leaving
or entering Vietnam in accordance with
the working period in industrial zones.
They are also allowed to reside or
temporarily reside inside the industrial
zones as well as in Vietnam.
The f ol l owi ng pages pr ovi de an
overvi ew of four maj or l ocat i ons
and the indutrial zones present there:
Haiphong, Danang, Ba Ria-Vung Tau,
and Ho Chi Minh City.
Dezan Shira & Associates is a foreign
direct investment practice offering
business advisory, tax, accounting, due
diligence, payroll and audit services
for multinational clients in China,
Hong Kong, India and Vietnam. For
professional advice and assistance
with tax and regulatory matters, please
contact vietnam@dezshira.com or
visit www.dezshira.com.
5 Vietnam Briefng | 2009
Industrial Zones in Vietnam: Haiphong
Haiphong
Industrial park Year of establishment Area Land lease price (US$) Encouraged industries
An Duong IP 2008 800 ha total;
Phase 1: 200 ha
Not in operation Clean industries, high technology
Do Son-Haiphong IP 1997 150 ha 55/m
2
/38 years Clean industries, mechanics at small and
medium scale, metal manufacturing, assembling
electric and electronic components for vehicles,
agri cul t ural and sea product processi ng,
beverage, garment, shoe, packaging, paper,
plastic
Dinh Vu IP 1997 982 ha total;
Phase 1: 164 ha
60-65/m
2
/38 years Oil and gas, petrochemicals, food processing,
textile and garment, leather, pottery, glass,
rubber, plastic, construction material, steel,
el ect ri c and el ect roni c manufact ure and
assembly, port services
Nam Cau Kien IP 2007 263 ha 55-60/m
2
/48 years Ship building
Nomura Haiphong IP 1994 153 ha 60-90/m
2
/38 years High technology, electronic technology
Trang Cat High
Technology IP
2008 300 ha Not in operation High technology industries
Trang Due IP 2006 359 ha 40-45/m
2
/48 years Cons umer goods , agr i cul t ur al pr oduct
processing, cattle-feed, logistics services
Haiphong
Approximately 100 kilometers from
t he Vi et namese capi t al of Hanoi ,
Hai phong i s Nor t her n Vi et nams
main deepwater and the third most
populous city in Vietnam. It is also
a highly industrialized city that is in
the process of modernizing much of
its infrastructure. Haiphong has an
area of 1,507 square kilometers and a
population of about 1.8 million people.
Devel oped sea t r anspor t at i on i n
Haiphong is one of main driving forces
of the northern economic region, which
includes seven cities and provinces:
Hanoi, Haiphong, Quang Ninh, Hai
Duong, Hung Yen, Vinh Phuc and Bac
Ninh.
One of fve centrally-controlled cities in
Vietnam, Haiphong contributes greatly
to the countrys budget. It currently
ranks fourth after Ho Chi Minh City,
Ba Ria-Vung Tau and Hanoi. In 2006,
the city contributed VND9.7 trillion;
in 2007, VND12 trillion and in 2008,
Haiphong contributed VND24 trillion.
Wi t h regards t o at t ract i ng forei gn
direct investment, by the end of June
2009, Haiphong attracted 301 projects
with the total registered capital of
US$4.28 billion. And while this figure
put Haiphong 10th for FDI out of all
cities and provinces nationwide, in the
Red River Delta the city ranked second
behind only Hanoi for attracting foreign
investment.
Haiphong now has four universities and
10 colleges which provide hundreds
of skilled laborers for companies and
organizations operating in Haiphong
and its surrounding areas.
Transportation
Air: The Cat Bi airport in Haiphong is
currently being used for domestic fights
connecting with Ho Chi Minh City and
Danang, and an international route to
Macau. An upgrading project of Cat
Bi into a fully integrated international
airport is underway.

Sea: Haiphong port is one of biggest
seaport s i n Vi et nam wi t h a l engt h
of 12 kilometers and a capacity of
over 15 million tons per year which
i s expect ed t o i ncrease t o around
30 million tons in 2010. Nearly all
goods and raw materials coming into
or l eavi ng Nort hern Vi et nam pass
through Haiphong, the only port of
importance in Northern Vietnam. An
urgent rehabilitation program for the
existing Haiphong seaport is now being
implemented. In addition, a new and
modern international deep seaport will
be constructed as part of the Dinh Vu
Industrial Zone development.
Inland waterways: Northern Vietnam
has an extensive network of navigable
i nl and wat erways l i nki ng vari ous
provinces, important towns and river
por t s. The wat er ways cont r i but e
40 pe r c e nt t owa r ds t he ove r a l l
t ransport at i on syst em i n Nort hern
Vietnam with Haiphong as their nerve
center.
Rai l : Hanoi - Hai phong- Lao Cai -
Kunming, the international railway line
between Vietnam and Southern China,
has been revitalized. The historic Hanoi-
Beijing line is fully operational.
Road: The main roads running through
and connect i ng Hai phong t o key
destinations are:
Hanoi-Haiphong Highway
National Road 5A: linking Hanoi and
Hai Duong Province
National Road No. 10: linking Quang
Ninh in the North and the provinces
of Thai Binh, Nam Dinh and Ninh
Binh in the South
Industrial parks in Haiphong
According to the development plan
f or 2020, Hai phong wi l l become
an industrial city with 13 industrial
parks with a total land area of 2,400
ha. However, Haiphong adjusted this
plan by itself in order to develop 33
industrial parks and one traditional
6 Vietnam Briefng | 2009
Industrial Zones in Vietnam: Danang
industrial village group with a total land
area of over 4,616 hectares, most of
which are of a small size.
There are seven industrial parks of
medium and large scale in Haiphong
including Do Son-Haiphong, Dinh Vu,
Nomura, An Duong, Nam Cau Kien,
Trang Cat High Technology and Trang
Due. The industrial parks Do Son-
Haiphong, Dinh Vu and Nomura were
the first to be established in Haiphong
and as a result, are now almost fully
occupied. An Duong, Nam Cau Kien,
Trang Cat High Technology and Trang
Due have all been established over the
past three years.
Danang
Located on the coast of the South China
Sea, Danang is a major port city in the
South Central Vietnam. It is the fourth
largest city in Vietnam after Hanoi, Ho
Chi Minh City and Haiphong, with an
area of 1,256 square kilometers and a
population of 867,500 people. Situated
nearly equidistant from Hanoi and Ho
Chi Minh City, Danang is at the end
of the East-West Economic Corridor
(EWEC), which stretches over the
countries of Vietnam, Laos, Thailand
and Myanmar.
Danang is classified as an industrial
zone with port facilities to handle
container traffic; a number of light
industries are located in the city as well.
In 1991 Danang became one of the four
independent municipalities in Vietnam
(Vietnam now has five independent
municipalities). As a result, the city
has had very fast annual economic
growth at an average of 11 percent to
12 percent. The citys main economic
output includes seafood, furniture,
household goods, clothing and tourism.
The provincial GDP per capita in 2008
is around US$1,200.
With regards to attracting foreign direct
investment, by the end of 2008, Danang
attracted 143 projects with the total
registered capital of US$2.55 billion.
The growth of FDI in terms of the
number of new registered projects is 40
percent per year over the last ten years,
higher than the average growth of the
country of 34 percent annually.
In 2008, Danang, for the first time,
passed southern Binh Duong province
t o l ead t he nat i on i n t he year s
provincial competition index (PCI) that
was jointly released by the Vietnam
Chamber of Commerce and Industry
and t he Vi et nam Compet i t i veness
Initiative project. The latter is sponsored
by the U.S. Agency for International
Development (USAID). The PCI has
been carried out the since 2005, and
aims to assess economic development
based on the business environment
for the private sector in provinces and
cities. The PCI takes into account ten
sub-indices that capture key elements of
the local business environment that are
directly influenced by the actions and
attitudes of provincial authorities. These
include input costs, proactivity of local
leadership, labor training, transparency
and access to information, state sector
bi as, pr i vat e sect or devel opment
services, land access and security of
tenure, legal institutions, informal
charges and time cost of regulatory
compliance.
Danang is the largest educational and
training center in Central Vietnam, and
the third largest center for learning in
the country after Hanoi and Ho Chi
Minh City. The city has a total of 15
universities and institutes; 17 colleges
and numerous vocat i onal t rai ni ng
schools. There are over 200 schools
at all levels providing thousands of
skilled laborers for companies and
organizations operating in Danang and
the surrounding regions.
Danang
Industrial park Year of establishment Area Land lease price (US$) Encouraged industries
Danang IP 1993 62.99 ha 0.60/m
2
/year
Textile, garment, leather bags and shoes, electric
and electronic manufacturing and assembling
Hoa Cam IP 2003 266 ha 0.60/m
2
/year
Processing agricultural and sea products,
building materials and high quality interior
decoration, other industries (plastic, chemical
cosmetics, packaging)
Hoa Khanh IP 1999 423.5 ha 0.60/m
2
/year
Mechani cal manuf act ur i ng, as s embl y,
electronics and garments, agricultural, forestry
and seafood processing, packaging and plastics
Expanded Hoa Khanh
IP
2004 316.52 ha 0.60/m
2
/year
Electronics and garments, agricultural, forestry
and seafood processing, post-petrochemical
products, construction materials
Lien Chieu IP 1998 373.5 ha 0.60/m
2
/year
Heavy industries such as steel, rubber, cement,
chemical, construction material, machinery
assembly
Danang Sea Product
Service IP
2001 77.3 ha 0.60/m
2
/year
Sea product processing, fshing port service
Danang High
Technology IP
2009 1,400 ha Not yet in operation
High-tech research and development center,
human resource training center, tax-suspension
area
Danang Information
Technology IP
2009 50 ha Not yet in operation
Information technology
7 Vietnam Briefng | 2009
Industrial Zones in Vietnam: Ba Ria-Vung Tau
Transportation
Air: Danang International Airport,
located at the center of the city, is the
third international airport in Vietnam
(together with Noi Bai in Hanoi and
Tan Son Nhat in Ho Chi Minh City).
It is an important gateway to access
Central Vietnam, as well as the Central
Highlands. The airport has domestic
connections (connecting Hanoi, Ho Chi
Minh City, Quy Nhon, Tuy Hoa, Buon
Me Thuot, Pleiku and Cam Ranh),
and a limited number of international
routes (Bangkok, Singapore, Seoul and
Osaka).
Sea: Located at a favorable position
in regional sea routes, Danang is 310
sea miles from the port of Haiphong,
520 sea miles from the port of Saigon,
480 sea miles from the port of Macau,
550 sea miles from Hong Kong, 720
sea miles from Manila, 960 sea miles
from Singapore, 1,030 sea miles from
the port of Taipei, and 1,060 sea miles
from Thailand's main port. It takes only
two days for commodities to be shipped
from Danang to other countries in the
region such as the Philippines, Malaysia,
Singapore, and Thailand. Danang harbor
is the third largest seaport in Vietnam
with an average of 15-20 meters in
depth and can harbor ships of around
28,000 tons and over 220 meters long.
Danang harbor includes three ports:
Tien Sa, Lien Chieu and Han River.
Rail: Danang is one of key hubs of the
North South Railroad of Vietnam. There
are five stations in the city: Danang,
Thanh Khe, Kim Lien, Hai Van and Hoa
Chau.
Road: The ma i n r oa ds r unni ng
through and connecting Danang to key
destinations are:
National Highway 1A: linking Hanoi
to the North and Ho Chi Minh City to
the South;
Nat i onal Hi ghway 14B: l i nki ng
South Central coast provinces and the
Central Highlands of Vietnam.
Industrial parks in Danang
Currently, Danang has eight industrial
parks that are either operational or
in the process of becoming so. The
six parks currently open are An Don,
Danang, Hoa Cam, Hoa Khanh, Lien
Chieu, and Danang Sea Product Service.
Two industrial parks are calling for
investment in infrastructure, including
the Danang High Technology Industrial
Park and t he Danang Informat i on
Technology Industrial Park which are
expected to come online by the end of
the year.
Ba Ria-Vung Tau Province
Ba Ria-Vung Tau Province is located
on the coast of Vietnam's southeastern
region, adjacent to Dong Nai Province
i n t he nort h, Ho Chi Mi nh Ci t y i n
Ba Ria-Vung Tau Province
Industrial park Year of establishment Area Land lease price (US$) Encouraged industries
Cai Mep IP 2002 670 ha
1.43/m
2
/year or
35.2/ m
2
/45 years
LPG production, condensation, oil & gas,
plastic and chemical, logistics, food processing,
metallurgy
Chau Duc IP 2008 1,550 ha Not yet in operation Not established
Dong Xuyen IP 1996 160.8 ha 1.5/m
2
/year
Oil and gas services, mechanics, ship repair and
building, marine services
Long Son IP 2008 1,250 ha 70/m
2
/48 years
O i l r e f i n e me n t , p e t r o c h e mi c a l s ,
thermoelectricity, construction material, steel
and aluminum refnement, mechanics, assembly,
drilling platform repair
My Xuan A IP 1996 301 ha 38.5/m
2
/46 years
Electric components, aquatic products, food
processing, steel, ceramic, glass, cement,
woodwork, shoes
My Xuan A2 IP 2001 312.8 ha
1.54/m
2
/year or
37.4/m
2
/44 years
Mechanics, electronics, wood manufacturing,
construction material, leather shoes
My Xuan B1
CONAC IP
2006 226 ha
1.65/m
2
/year or
44/m
2
/43 years
Mechanics, electronics, wood manufacturing
My Xuan B1 Dai
Duong IP
2006 145.7 ha
1.4/m
2
/year for frst
fve years; 1.3/m
2
/year
from sixth year
Precise mechanics, electronics, high-tech, steel,
fertilizer, chemicals, food technology
My Xuan B1 Tien
Hung IP
2006 200 ha
1.43/ m
2
/year or
35.2/m
2
/49 years
Home appliances, wood manufacturing, high-
class apparel, construction materials
Phu My I IP 1988 954.4 ha 1.4 USD/m
2
/year
Electricity, steel, fertilizer, chemistry, heavy
industries
Phu My II IP 2005 620.6 ha
1.51/m
2
/year frst fve
years; 1.2/m
2
/year
from sixth year
Metallurgy, petrochemicals, construction
materials
Phu My III IP 2008 800 ha 70/m
2
/48 years
Heavy industries using high-technology with
less environmental pollution, river ports,
container grounds, local and bonded warehouses
8 Vietnam Briefng | 2009
Industrial Zones in Vietnam: Ho Chi Minh City
the west, Binh Thuan Province in the
east and the South China Sea in the
south. It also includes the Con Dao
islands, located some distance off the
southeastern coast. Ba Ria-Vung Tau is
in the key economic region in southern
Vietnam, including seven provinces,
namely Ho Chi Minh City, Dong Nai,
Ba Ria-Vung Tau, Binh Duong, Binh
Phuoc, Long An and Tay Ninh.
Ba Ri a-Vung Tau Provi nce has an
area of 1,982 square kilometers and a
population of around 1 million people.
However, it contributes greatly to the
countrys budget, around 24 percent
in 2005 (VND42 trillion out of total
VND180 trillion), ranking second after
Ho Chi Minh City and coming in before
Hanoi . In 2008, Ba Ri a-Vung Tau
ranked frst in terms of GDP per capital
at US$4,500 (excluding petroleum
GDP), followed by Ho Chi Minh City at
US$2,500 and Hanoi at US$1,500.
The provinces economic activities
include petroleum (the most important),
electricity production (accounting for
approx. 40 percent of the countrys
total power capacity), petrochemicals,
pol yet hyl ene, s t eel and cement
production. Tourism, commerce and
fishing are also important economic
activities of the province.
Ba Ria-Vung Tau is also one of the
l eadi ng forei gn di rect i nvest ment
l ocat i ons one of t he t op fi ve FDI
acquisition provinces of Vietnam. In
2007, the province ranked fifth among
cities and provinces for attracting
FDI in Vietnam, accounting for 1.8
percent of all projects and 7.2 percent
of registered capital. In 2008, Ba Ria-
Vung Tau ranked second out of a total
of 43 cities and provinces nationwide
with four projects registering US$9.35
billion, accounting for 15.5 percent of
total registered capital. In the frst half
of 2009, the province attracted seven
new projects and two expanded projects
with registered capital of US$6.46
billion, accounting for 72.8 percent.

Transportation
Air: There are two airports: Vung
Tau Ai rport i n Vung Tau Ci t y and
Co Ong Airport on Con Dao Island,
accommodating helicopters which
mostly serve for petroleum exploration
and exploitation and the transportation
of pas s enger s f r om Vung Tau t o
Con Dao island, Ho Chi Minh City
or Si nga por e . The Long Tha nh
International Airport currently under
construction in Dong Nai province is
70 kilometers away from Vung Tau
City and 20 kilometers away from the
provinces border.
Sea: There are around 20 harbors
along the rivers and coastal areas:
Vietsovpetro and PTSC (which can
harbor 10,000-ton ships), Petroleum
K2 and Commerce (which can harbor
5,000-ton ships), and Cat Lo and Phuoc
Tinh (which can harbor 1,000-2,000-ton
ships). In particular, the 300 meter-long
deep water port Ba Ria-Serece along
the Thi Vai River can harbor 60,000-
ton ships. The maximum capacity of
the harbors in the province can reach 80
million tons per year.
Road: The main roads running through
and connect i ng Ba Ri a-Vung Tau
Province to key destinations are:
National Highways 51 and 56: linking
Ho Chi Minh City and Dong Nai
Province
National Highway 55: linking Binh
Thuan Province
Industrial parks in Ba Ria-Vung
Tau province
According to the government's master
plan of socioeconomic development
in Ba Ria-Vung Tau Province from
2001-2010, there were only to be nine
industrial parks established with a total
area of 4,460 hectares.
As of 2009 however, 12 industrial parks
have been established with a total area
of around 7,000 hectares. Of these,
seven are newly established or have
been expanded over the past three years,
including the newly established My
Xuan B1-Tien Hung (200 hectares), My
Xuan B-Dai Duong (145.7 hectares),
Phu My III (800 hectares), Long Son
(1,250 hectares) and Chau Duc (1,550
hectares); and the expanded Phu My II
(403 hectares) and My Xuan A2 (109
hectares). In 2009, two more industrial
parks, Dat Do IP (500 hectares) and
Long Huong ( 400 hect ar es ) , ar e
expected.
By the end of 2008, all 12 industrial
parks in Ba Ria-Vung Tau had attracted
a total of 194 projects with a total
registered capital of US$11.4 billion
in a land area of 1,897 hectares, about
36 percent of thetotal land area. This
included:
Foreign direct investment: 96 projects
with a total capital of US$8.35 billion
Domestic investment: 98 projects
with a total capital of US$3.1 billion
The total number of laborers working in
industrial parks by the end of 2008 were
25,200.
Ho Chi Minh City
Located in the South of Vietnam, Ho
Chi Minh City is the second biggest
city in the country, following the newly
enlarged Hanoi. The city covers an
area of 2,057 square kilometers and has
a population of around 7 million people.
Ho Chi Minh City is the industrial,
commercial, fnancial and service center
of Vietnam, and is also the center of
southern economic area including Ho
Chi Minh City and other surrounding
provinces of Ba Ria-Vung Tau, Dong
Nai, Binh Duong, Long An, Tay Ninh
and Tien Giang. This region spreads
out to a total area of 24,754 square
kilometers and accounts for a population
of more than 10 million people. It is also
the most active and attractive market for
foreign investors in the country.
Ho Ch i Mi n h Ci t y i s t h e mo s t
important economic center in Vietnam
as it accounts for a big percentage of
Vietnam's economy. Ho Chi Minh City
contributes 20 percent to the nations
GDP, 30 percent to its industrial output
and 40 percent of the countrys export
revenues. The city also takes frst place
in terms of the GDP per capita.
Higher education in Ho Chi Minh City
is quite developed, concentrating about
76 universities and colleges with a total
of over 380,000 students yearly.
Transportation:
Air: Tan Son Nhat International Airport
is located six kilometers north of the
center (District 1) of Ho Chi Minh City.
9 Vietnam Briefng | 2009
Industrial Zones in Vietnam: Ho Chi Minh City
Because of the rapid growing number of
passengers and Tan Son Nhat Airport's
proximity to the center of the city, the
Vietnamese government is preparing
to build a new international airport
near Long Thanh Township, Dong
Nai Province about 40 kilometers to
the northeast. After completion, Long
Thanh will become the international
airport while Tan Son Nhat will handle
only domestic traffc.
Sea: There are many harbors along the
Saigon and Dong Nai Rivers including:
Saigon Port, Newport, Ben Nghe Port
and VICT Port. They account for the
40 percent of Vietnam's annual export-
import cargo output.
Rail: Ho Chi Minh City is the terminal
hub of the North-South Railroad of
Vietnam. Passengers can travel to Hanoi
and the Chinese border, about 1,950
kilometers to the north.
Road: Main roads running through
and connecting Ho Chi Minh City with
some key destinations include:
National Highways 14 and 20: linking
Ho Chi Minh City to the Central
Highlands;
National Highway 1: linking Ho Chi
Minh City to the Central Coast and
the North;
National Highways 1 and 50: linking
Ho Chi Minh City to the Mekong
River Delta.
Two expressways are being built to
connect Ho Chi Minh City to Can Tho,
the capital of the Mekong River Delta,
and to Dau Giay Township, Dong Nai
Province, 70 kilometers to the northeast.
The city also has a network of rivers
and canals that used for navigation and
irrigation.
Industrial parks
There are t hree export processi ng
zones and 12 industrial parks in Ho Chi
Minh City which have attracted 1,156
investment projects, in which there are
472 foreign investment projects with
the total capital of over US$2.6 billion.
Exports have been valued over US$16
billion with the big major markets
are Japan, Europe, the United States,
Taiwan and China out of more than 50
countries and territories. At the moment,
t he i ndust r i al par ks empl oy over
250,000 workers.
Accor di ng t o t he mast er pl an f or
industrial development in Ho Chi Minh
City, by 2010, the land reserved for
export processing zones and industrial
parks will be 7,000 hectares with 23
export processing and industrial zones.
At present, the development orientation
of t he Ho Chi Mi nh Ci t y expor t
processing zones and industrial parks
focuses on attracting investors who will
invest in modern and high-tech fields
including mechanical engineering,
electronics and chemistry.
Most of the EPZs and IPs in Ho Chi
Minh City are close to fully occupied.
However, Tan Phu Trung still has space
available while Phong Phu and Dong
Nam Cu Chi remain uncompleted at this
time.
Ho Chi Minh City
Industrial park Year of establishment Area Land lease price (US$) Encouraged industries
Tan Thuan EPZ 1991 300 ha 108/m
2
/lease period Manufacturing, electrical appliances, natural
rubber processing, sports equipment, paper
products, packaging, high quality porcelain,
pharmaceuticals
Linh Trung I EPZ 1992 62 ha 2/m
2
/year Electronics, micro-electronics, electrical
appliances, natural rubber processing and
plastics, textiles, pharmaceutical products,
cosmetics, jewelry, leather products
Linh Trung II EPZ 2000 61.7 ha 80/m
2
/lease period Mechanical products, electronics, paper
(except pulp), packing, garments, textiles,
food processing, beverages, consumer goods,
household goods, furniture, handicraft articles,
leather (except leather tanning), fur and hides,
wool, sport equipment
Tan Tao IP 1996 442 ha 140/m
2
/lease period Mechani cal engi neer i ng, el ect r oni cs,
textiles, garments, tanning, leather products,
agr i cul t ur al pr oduct pr ocessi ng, f ood
processi ng, cosmet i c chemi cal s, wood
processing, paper, plastics, rubber, glassware,
building materials
Tan Binh IP
(phase 1)
1997 163.3 ha 80/m
2
/47 years Mechanical engineering, electronics assembly,
garments, textiles, leather products, household
goods, pharmaceuticals, food processing
Le Minh Xuan IP 1997 100 ha 70/m
2
/47 years Light industries, mechanical engineering,
metal reducing and rolling, plastics, electronic
assembly, garments, textiles, leather products
Vinh Loc IP
(phase 1)
1997 207 ha 100/m
2
/42 years Non-polluting industries such as mechanical
engineering, electronic assembly, garments,
textiles, leather products, food processing
Sectors Entitled to Investment Preferences in Vietnam
10 Vietnam Briefng | 2009
Manuf ac t ure of ne w mat e r i al s
and product i on of new energy;
manufacture of products of high-
technology, of biotechnology or of
information technology; mechanical
manufacturing
Production of soundproof, electricity
i nsul at ed or hi gh heat - i nsul at ed
materials; synthetic materials used
as a substitute for wood; fire-proof
materials; construction plastics; glass
fber; special-use cement
Production of non-ferrous metals and
refning of cast iron
Production of molds and prototypes for
metal and non-metal products
Investment in the construction of new
power plants, in power distribution and
transmission
Production of medical supplies and
equipment, construction of warehouses
for the preservation of pharmaceutical
products, reserves of medicines for
human use in case of natural disasters
and dangerous epidemics
Production of equipment used for
testing toxic substances in foodstuffs
Development of the petrochemical
industry
Production of coke and active coal
Production of plant protection drugs,
pesticides, preventive and curative
dr ugs f or a ni ma l s a nd a qua t i c
creatures; veterinary drugs
Materials for producing medicines or
medicine for prevention or treatment
of social diseases; vaccines; biological
products; medicines produced from
pharmaceutical materials; eastern
medicines
Investment in the construction of
facilities for biological experiment,
a s s e s s me nt of t he a va i l a bi l i t y
o f me d i c i n e ; p h a r ma c e u t i c a l
es t abl i s hment s s at i s f yi ng GMP
standards in producing, preserving,
t est i ng, and carryi ng out cl i ni cal
tests of medicines, planting, rearing
or har vest i ng and pr ocessi ng of
pharmaceutical materials
De v e l o p me n t o f s o u r c e s o f
pha r ma c e ut i c a l ma t e r i a l s a nd
p r o d u c t i o n o f me d i c i n e f r o m
pharmaceutical materials; projects
for research or subst ant i at i on of
scientifc grounds for prescriptions for
Eastern medicines and formulation
of st andards t o t est prescri pt i ons
for eastern medicines; survey and
statistics of types of pharmaceutical
materials used to produce medicines;
collection, inheritance and application
of prescriptions for Eastern medicines;
finding, exploitation and use of new
pharmaceutical materials
Production of electronic appliances
Production of machines, equipment
and detail assemblies for the following
sect ors: oi l and gas expl oi t at i on,
mining, energy and cement; production
of l arge-si zed l i ft i ng equi pment ;
production of machine tools for metal
processing and metallurgy equipment
Investment in the manufacture of high
and medium voltage electric devices or
generators of large capacity
Investment in the production of diesel
engines; investment in the repair or
building of ships; equipment and spare
parts for transportation and fishing
ships; production of dynamic and
hydraulic machinery and spare parts
and compressing machines
Production of equipment, vehicles and
machinery for construction; technical
equipment for the transportation sector;
locomotives and carriages
Investment in the manufacture of
machine tools, machinery, equipment
Sectors Entitled to Investment Preferences in Vietnam
Ho Chi Minh City
Industrial park Year of establishment Area Land lease price (US$) Encouraged industries
Tan Thoi Hiep IP 1997 215.4 ha 80/m
2
/project life Pharmaceutical products, cosmetics, consumer
goods, porcelain, glassware, plastics, rubber,
aluminum, handicrafts for export
Tay Bac Cu Chi IP 1997 220 ha 48/m
2
/lease period Porcelain, glassware, export handicrafts,
furniture, pharmaceutical products, cosmetics
Binh Chieu IP 1996 27.34 ha - Paper packaging, building materials, food
processing, forest products, high quality paint,
steel products
Hiep Phouc IP
(phase 1)
1996 311.4 ha 70/m
2
/project life Heavy industries, mechanics, chemicals, metal
processing and building materials
Cat Lai II IP 1997 111 ha 80/m
2
/project life Mechanical engineering, electronics, concrete
components, packaging and distribution,
bui l di ng mat eri al s, t ext i l es, garment s,
handicrafts
Phong Phu IP 2002 163.3 ha 60/m
2
/project life El e c t r oni c s ( s of t wa r e a nd ha r dwa r e
manufacture), garments, food processing, new
building materials
Tan Phu Trung IP 2008 543 ha 80/m
2
/lease period Manufacturing precision mechanic equipment,
safety control equipment, processed foods,
high-class materials for producing garments,
shoes for export, textiles (without dying),
imitation leather
Dong Nam Cu Chi IP 2008 338.4 ha Not in operation Not yet established
Sectors Entitled to Investment Preferences in Vietnam
11 Vietnam Briefng | 2009
and components for agricultural and
forest production; machinery for food
processing; irrigation equipment
I nvest ment i n t he pr oduct i on of
equipment, machinery for textiles,
garments and leather industries
Breedi ng, reari ng, growi ng and
processing of agricultural, forest and
aquaculture products; salt making;
production of artificial strains, new
plant varieties and livestock breeds
Growing plants for pharmaceutical
purposes
Investment in post-harvest preservation
of agricultural products, preservation
of agr i cul t ur al and aquacul t ur e
products and foodstuffs
Production of bottled or canned fruit
juices
Production and refining of feed for
cattle, poultry and aquatic resources
Techni cal ser vi ces f or pl ant i ng
industrial and forest trees, husbandry,
aquaculture, protection of plants and
livestock
Pr oduc t i on, mul t i pl i c a t i on or
crossbreeding for new plant varieties
or livestock breeds
Use of high technology and modern
techniques; protection of the ecological
environment; research, development
and nursery of high technology
Ma nuf a c t ur e of e qui pme nt f or
responding to and dealing with oil
spills
Manufacture of equipment for waste
treatment
I nves t ment i n t he cons t r uct i on
of technical facilities and works:
laboratories and experimental stations
to apply new technology to production;
investment in the establishment of
research institutes
Labor intensive industries
Projects regularly employing between
500 and 5,000 employees
Construction and development of
infrastructures
Cons t r uct i on of i nf r as t r uct ur e
serving the production and business
of cooper at i ves and t he l i f e of
communities in rural areas
Investment and commercial operation
of infrastructure and investment in the
production of industrial complexes,
industrial spots and complexes of rural
trade villages
Construction of water plants and water
supply systems for civil and industrial
use; investment in the construction of
water drainage systems
Construction and upgrading of bridges,
roads, terminals, airports, seaports,
railway stations, bus stations and
parking lots; establishment of new
railway routes
Construction of technical infrastructure
for concentrated population areas in
select geographical areas
Development of education, training,
health care, physical training, sports
and national culture
Investment in the construction of
i nfrast ruct ure for educat i on and
training establishments; investment
i n t he const ruct i on of publ i c and
private schools, and education and
training establishments at the levels of
preschool education; general education,
vocational high-school education and
tertiary education
Establishment of public and private
hospitals
Construction: physical training or
sport centers, training facilities and
physical training and sports clubs;
establishments for the production,
manufacture and repair of equipment,
supplies and equipment for physical
training and sports
Establishment of national cultural
houses; national dance, music and song
troupes; theaters, flm studios, cinemas;
establishments for the production,
manufacture and repair of national
musical instruments; maintenance and
preservation of museums, national
cultural houses and culture and arts
schools
Investment in the construction of
nat i onal t ouri st si t es, ecol ogi cal
tourist sites and cultural parks for
sports, entertainment and recreational
activities
Development of traditional trades and
occupations
Building up and developing traditional
t r ades and occupat i ons f or t he
production of fine-art and handicraft
goods , pr oces s i ng agr i cul t ur al
product s, foodst uffs and cul t ural
products
Other manufacturing and service
sectors
Provision of Internet connection,
access and application services and
points for accessing public telephones
in select areas
Development of mass transit including:
transportation by ship, aircraft, railway,
road transportation of passengers
by car s wi t h 24 s eat s or mor e,
transportation of passengers by modern
and high-speed vehicles by inland
waterway, and container transportation
I nvest ment i n t he r el ocat i on of
production establishments to non-
urban areas
Investment in the construction of
class-I marketplaces and exhibition
centers
Production of childrens toys
Activities in mobilizing capital and
lending capital to peoples credit funds
Legal consul t ancy, consul t ancy
services on intellectual property and
technology transfer
Pr oduct i on of var i ous t ypes of
mat er i al s f or t he pr oduct i on of
pesticides
Production of base chemicals, purifed
chemicals, special-use chemicals and
dyes
Pr oduct i on of mat er i al s f or t he
production of detergents and additives
for the chemical industry
Production of paper, cartons, artifcial
planks from domestic agricultural and
forest materials; production of pulp
Weaving and fashioning of textile
products; production of silk and fbers
of all types; tanning and processing of
leather
Investment projects on production
activities in industrial parks established
under decisions of the prime minister
For a list of sectors entitled to special
investment preferences, please visit the
web site (www.vietnam-briefing.com).
For more information on investment
incentives, industrial zones and foreign
direct investment in Vietnam, please
contact vietnam@dezshira.com or visit
www.dezshira.com.
VIETNAM BRIEFING
The Practical Application of Vietnam Business
Daily Business News Available at
www.vietnam-briefng.com/news Volume III - Number I
Managing
Human Resources
in Vietnam
In This Issue:
Managing Human Resources
Managing Payroll
Mandatory Benefts for Employees
Regional Update: The Urban Renewal of Hanoi and Ho Chi Minh City
I
n this issue of Vietnam Briefng, we tackle the legal aspects of managing human resources in Vietnam. Many foreign investors
move operations to Vietnam to take advantage of its skilled and inexpensive labor force. As the economy expands further and more
businesses enters the country, an increasing important part of corporate strategy will be fnding ways to effectively motivate staff while
also complying with local labor laws. We cover various topics under recruitment and hiring including salary, mandatory benefts, labor
contract, work permits, working hours, bonuses, trade unions and insurance.
We also look at the ongoing urban renewal of Hanoi and Ho Chi Minh City as the cities expand to accommodate more local and
foreign investment.
The articles in this issue of Vietnam Briefng were written in coordination with the foreign direct investment and tax consultancy
Dezan Shira & Associates based in their primary offces in Hanoi. Please contact the frm at vietnam@dezshira.com if you have any
questions.
Best regards,
Joyce Roque
Editor, Vietnam Briefng
This issues cover photo is by clip works under the creative commons license. This photo was taken at Cao Dai Temple located 60 miles northwest of Ho Chi Minh City.
Cao Dai is a syncretist, monotheistic Vietnamese religious movement that blends elements of Buddhism, Taoism, Confucianism and Catholicism. The temple's architecture
refects the religion's ideology fusing many different styles in one structure.
All materials and contents 2010 Asia Briefng Ltd.
No reproduction, copying or translation of materials without prior permission of the publisher. Contact: editor@vietnam-briefng.com
3 Vietnam Briefng | 2010
Managing Human
Resources in Vietnam
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
O
ne of Vietnams major
advantages is its skilled
and inexpensive labor
force that makes it an
attractive destination
f or f or ei gn i nvest or s. Accor di ng
to the 2009 census, Vietnam has a
population of 85.8 million people,
making it the third most populated
country in Southeast Asia and 13th in
the world. The population is expected
to grow to 87 million this year, half
of which will be under 30 years old.
Forei gn compani es want i ng t o do
business in the country must ensure
they follow the provisions of the Labor
Code. It contains the legal framework
f or t he r i ght s and obl i gat i ons of
employers and employees with respect
to working hours, labor agreements,
social insurance, overtime, strikes, and
termination of employment contracts,
to name a few. In addition, there are
regularly issued decrees and circulars
guiding the provisions of the code.
Recruitment
Pr evi ous l y, f or ei gn ent er pr i s es
were required to recruit Vietnamese
employees via a local employment
service agency, but now companies can
hire directly. This has made it easier
for employers to manage their internal
recruitment needs provided that they
provide a list of hired employees to
local labor authorities.
Ac c o r d i n g t o Vi e t n a me s e l a w,
employees must be at least 15 years old
with a proven capacity to work.
Laws do not state the maximum age for
employees but provide a retirement age
for the purpose of pension calculation
only. On average, retirement ages for
male and female employees are 60 and
55 respectively. Senior employees who
continue to work pass the retirement
age are eligible for extra benefits and
pension payments.
On recruiting foreigners, since April
2008 the 3 percent cap on foreigner
empl oyee t o l ocal empl oyee rat i o
for ent erpri ses has been removed.
Employers in Vietnam can now hire an
unlimited number of foreigners as long
as the employees meet requirements to
work as managers, executive directors
and experts and the position cannot
be filled by a local hire. Each foreign
enterprise shall be allowed to hire a
minimum of three expatriate employees.
However, the employer must have
a training program for Vietnamese
employees to be allowed to take over
these positions in the future as required
by the government.
In the case of a foreigner internally
transferring within an enterprises
representative offce and foreign branch,
at least 20 percent of the total number
of the managers, executive directors
and experts with a commercial presence
within the country must be Vietnamese
citizens. Foreigners wishing to work
in Vietnam must be at least 18 years
of age with good health; be a manager,
executive director or an expert who
possess technical qualifications and
professional experience; and not have
a criminal record due to a national
security offense nor currently be subject
to criminal prosecution or any criminal
sentence in Vietnam and overseas.
All foreigners working in the company
for a period of three months or more
are required to obtain a work permit
with the exception of the member of
a limited liability company with two
or more members, the owner of a one
member limited liability company and
members of the board of management
of a shar ehol di ng company. The
employer is required to submit work
permit applications to the local labor
department for its expatriate employees.
A Vietnamese work permit is good
for up to 36 months with the option to
extend if needed.
Following the latest draft regulation
f r om t he Mi ni st r y of Labor, War
Invalids and Social Affairs, foreigners
working in the country will be given
until July 2010 to apply for a work
permit or risk being deported back to
their home countries. Foreign nationals
who have been working in Vietnam for
more than three months without a work
permit will not have their visas or their
temporary residence cards extended.
The new draft regulation also adds
a fine for employers found violating
foreign employee requirements varying
from US$268 to US$535.
The labor contract
There are three kinds of labor contracts
under Vietnamese law:
A l abor cont ract wi t h i ndefi ni t e
term in which two parties do not
determine the term and the time for its
termination
4
Managing Human Resources in Vietnam
Vietnam Briefng | 2010
A labor contract with defnite term in
which the two parties determine the
term and the time for its termination
as a period of 12 months to 36 months
A labor contract for a specific or
seasonal job with a term of less than
12 months
A labor contract with defnite term or for
seasonal jobs must be renewed within
30 days after the expiry date if the
employee continues working otherwise
the signed contract shall become a labor
contract with indefnite term. Moreover,
if the labor contract is renewed after two
defnite contracts, the two parties must
sign a labor contract with indefinite
term regardless of any reason.
A seasonal labor contract for a term
of less than 12 months is prohibited
to apply for permanent jobs lasting
for a year or more, except for cases
wherein there is a need to fll temporary
vacancies during military service,
maternity leave or other temporary
leaves.
Moreover, a labor contract must be
made in writing and signed directly
between the employer and the employee
in duplicate where each party retains
one copy. However, a contract with
a term of less than three months or
relating to housework can be done so
verbally but both parties will also be
subject to the tenets of the labor code as
a matter of course.
A labor contract must also contain
provisions such as scope of work,
working hours, rest breaks, wages, job
location, term of contract, conditions on
occupational safety, hygiene and social
insurance. Employers can use a standard
form or customize a labor contract
themselves by following the guidelines
prescribed by law. In the case of hiring
foreign employees, the contract shall
be written in Vietnamese with possibly
a section written in a foreign language.
Legal val i di t y shal l onl y appl y t o
the conditions stated in Vietnamese
language.
Probationary agreements are often
included in the contracts. Probation
can last 60 days for highly qualified
empl oyees and a maxi mum of 30
days for others. During that period,
either party may terminate the labor
contract without giving advance notice
and wi t hout any compensat i on i f
work performance does not meet job
requirements.
Both employer and employee may
unilaterally terminate a contract in
certain circumstances specified under
t he l abor code. A 45 day not i ce i s
required for indefinite term contracts,
30 day not i ce f or def i ni t e t er m
cont ract s and t hree day not i ce for
seasonal contracts. In some cases, the
employer will be required to discuss
the termination with the executive
committee of the trade union.
Working hours and breaks
The law allows for eight hour working
days and a 48 hour working week. An
employer and an employee may agree
on overtime provided that the number
of additional hours does not exceed 4
hours a day or 200 hours per year. In
some special cases, this limit may be
extended to a maximum of 300 hours
subject to the approval of the relevant
competent state authority. Since 1999,
government employees have adopted a
40 hour work week. Businesses are thus
encouraged to adopt the same.
Employees are allowed at least a half-
hour break within eight consecutive
working hours, and a minimum 24
hour rest period per week. Employees
working on night shift are to be given a
45 minute break per shift and a 12 hour
rest period in between two shifts.
Employees are entitled to company paid
holidays during the following:
New Year Holiday- January 1
Lunar New Year Holiday- four days
on the fnal day of the end of the year
and the first three days of the new
lunar year
Anniversary of King Hungs death- on
the 10th day of the third lunar month
Victory Day- April 30
International Labor Day- May 1
National Day- September 2
Where the public holidays referred to
above coincide with a weekly day off,
the employee shall be entitled to take
the following day off as well.
Annual leave
Employees working for a company for a
year will enjoy a paid annual leave of 12
days. The number of paid annual leave
is increased by one day for every five
years of working for the same employer.
For employees working less than one
year, their paid annual leave is prorated
to their actual working period or they
may alternatively receive payment in
exchange for unused leave.
In addition to annual leave, an employee
is allowed to take paid leave to deal
with personal affairs. An employee
is allowed a three day leave for their
own wedding; a one day leave on the
wedding day of their children; and three
day funeral leave for a death in the
immediate family.
Company working rules
Companies which employ ten or more
people must have a copy of company
rules or internal labor regulations
registered with the provincial labor
department. Company working rules
i ncl ude cont ent s such as worki ng
and rest hours, rules and orders in
the company, labor safety, hygiene in
the workplace, protection of assets,
business and technology confdentiality,
and sanction methods to name a few.
Company rules shall be the legal basis
for enforcing employee discipline.
Trade unions
All local and foreign companies in
the country are required to allow their
staff to form trade unions to represent
and protect their rights under the labor
collective. Employees may establish
a local trade union within six months
from the establishment of the company.
If a local trade union is not created by
the employees after that period, local
trade union authorities shall assign a
provisional Executive Committee of
Trade Union provided that there are at
least five employees joining. Foreign
companies with trade unions must
contribute an amount equivalent to one
percent of an employees monthly salary
to the trade union fund.
Fo r mo r e a d v i c e o n ma n a g i n g
human resources in Vietnam, please
e-mail Dezan Shira & Associates at
vietnam@dezshira.com.
5 Vietnam Briefng | 2010
Managing Payroll in Vietnam
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
I
n recent years, FDI fow into the
country has been improving and
an increasing number of foreign
compani es are est abl i shi ng
and operating businesses in
Vietnam. A thorough knowledge of the
Vietnamese salary structure is therefore
vital to attracting, maintaining and more
importantly motivating quality staff to
stay and contribute to the growth of the
company.
Salary and wages
The salary of Vietnamese employees
wor ki ng i n f or ei gn compani es i n
Vi e t na m i s de t e r mi ne d t hr ough
negot i at i on bet ween t wo par t i es
although it should not be less than
the minimum rates regulated by the
government . The rat es appl i cabl e
starting Jan. 1, 2010 are as follows:
VND1,340,000 (US$70.5) per month
for enterprises operating in the inner
city districts of Hanoi and Ho Chi
Minh City
VND1,190,000 (US$62.6) per month
for enterprises operating in outer city
districts of Hanoi and Ho Chi Minh
City; inner city districts of Haiphong;
districts of Danang; districts of Can
Tho City; Halong City in Quang Ninh
Province; Bien Hoa and some districts
in Dong Nai Province; the township
of Thu Dau Mot and the rural districts
of Thuan An, Di An, Ben Cat and Tan
Uyen in Binh Duong Province; Vung
Tau City, the township of Ba Ria and
Tan Thanh district in Ba Ria Vung
Tau Province
VND1, 040, 000 ( US$54. 7) f or
ent er pr i s es oper at i ng i n ci t i es
under provincial governments and
select districts and VND1,000,000
(US$52.6) per month for enterprises
operating in the areas not covered by
the rates previously mentioned
The U.S. dollar prices quoted previously
are based on the exchange rate: US$1 is
to VND19,000.
The above minimum wage rates are
only for Vietnamese employees doing
the most basic work in normal working
conditions. For those who have passed
vocational training courses,including
company training, wages are at least
seven percent higher than minimum
wage rates. Employers are encouraged
to pay higher than minimum wage rates
mentioned above.
Empl oyees who work ext ra hours
will be paid for those hours based on
their current wages as follows: on
regular working days be paid at least
150 percent; on the weekend be paid
at least 200 percent; on holidays and
paid leave days be paid at least 300
percent. In cases wherein the extra
working hours are at night, they will be
paid more according to the regulations.
When employees are given time off
in compensation for extra working
hours, employers will only pay for the
difference between the wages during
normal working hours and overtime
work. Employees on night shifts are
required to be paid at least 30 percent
higher than normal working hour wages.
Sal ari es pai d t o Vi et namese st aff
working for foreign companies must
be denominated in Vietnamese dong.
Foreign employers may base salary rates
in Vietnamese dong or U.S. dollars.
For salaries based in U. S. dollars,
employers must convert the amount into
Vietnamese dong following the average
exchange rate on the inter-bank foreign
currency market.
In general, a typical monthly salary
package will include gross salary and
mandatory insurance. Personal income
t ax wi l l be l evi ed on t he bal ance
after deducting mandatory insurance
contributions. Companies may now
print their own customized personal
income tax receipts according to a
circular released by the Ministry of
Finance in March.
Prior to Circular 37, employers had to
use pre-printed PIT receipt books from
local tax authorities. Customized PIT
receipts must first obtain pre-approval
from tax authorities and contain all
items provided in the standard form.
Employers will be allowed to print their
own receipts if they meet the following
conditions: withholding organization
is a legal entity in accordance with the
law; withholding organization has a tax
code; suitable computer and software
system are maintained; and withholding
organization has not been penalized for
more than two tax offenses in the last
year.
Remember t hat l ocal and forei gn-
invested companies doing business
in the country are required by law
to comply with Vietnam accounting
standards (VAS) when recording their
financial transactions. The laws are
Managing Payroll in Vietnam
6 Vietnam Briefng | 2010
based on i nt ernat i onal account i ng
standards, although not entirely since
it is still being continually revised and
changed. Fulfilling VAS requirements
i s a chal l engi ng t ask, more so for
f or ei gn smal l and medi um- si zed
enterprises entering the country to save
on manufacturing costs and working on
limited resources.
Foreign companies may opt to change
how they follow the VAS-based on their
own business needs but will need to
get prior approval from the Ministry of
Finance before doing so. Additionally,
forei gn compani es may choose t o
manage two accounting records; one
that is based on the VAS and another
compiled specifically for the overseas
head offce.
Vi et nam onl y began r evi si ng i t s
accounting laws in 2000 and in 2006
launched its new accounting standards.
In a nutshell, the VAS requires that
accounting records include: the use
of Vietnamese language; the use of
Vietnamese dong as the accounting
currency; compliance with the Vietnam
chart of accounts; producing numerous
reports as specifed by VAS regulations;
printing all reports on a monthly basis
and having it signed by the General
Director and affxed with the company
seal.
Foreign companies wanting to use
another currency for their financial
records need to submit an application
form to the Ministry of Finance. The
accounting currency unit must be mainly
used for a foreign companys banking
transactions, services and selling prices
quotations. It is also allowed to use the
same foreign currency as the currency
unit to account for revenue, employee
salary and payment of material costs.
Aut hor i t i e s ha ve be e n wor ki ng
t owar ds st r engt heni ng cor por at e
accounting system although on average,
enforcement has been relatively lax
when it comes to implementing full
VAS compliance. Be warned though
that there have been recent reports that
some provincial tax authorities cite VAS
non-compliance as a basis for collecting
additional tax and recovering paid VAT
refunds.
Tax authorities can penalize companies
for VAS non-compliance through the
disallowance of input VAT credits; the
withdrawal of corporate income tax
incentives and the change to the method
for application of corporate income tax.
Companies are advised to double check
their accounting system, taking care
to spot possible VAS non-compliance
issues.
Bonuses
Bonuses are given by employers based
on company earnings, performance
and also as a way of boosting company
morale and productivity. There are
var i ous ki nds of bonus es whi ch
compani es i n Vi et nam grant t hei r
employees during the year. A 13th
month salary is usually applied as a
kind of annual bonus by both local
and foreign companies in Vietnam
f or empl oyees wor ki ng wi t h t he
company at least a year. For employees
working for less than a year, the bonus
will be prorated based on the actual
employment period. Employees will
often receive it together with their 12th
month salary or at the beginning of the
following year.
In addi t i on t here i s al so a speci al
bonus called Lunar New Year bonus
or Tet bonus often paid to employees
before they leave for the Lunar New
Year holiday. Again the amount of the
bonus will be dependent on company
and employee performance. In cases
where there is severe competition in the
labor market, the Tet bonus is a way of
motivating and maintaining staff. These
bonuses can range from being a small
amount of money to being equal to 14th
month salary or even amount to a years
worth of salary if company business
does well.
Apart from the large annual bonuses
described above, employees can also
enjoy small bonuses during public
hol i days or speci al days such as
International Labor Day and National
Day. Senior management and other
val ued empl oyees can be off er ed
bonuses in the form of share certifcates
typically with a vesting period. Stocks
can be sold only after an employee
has worked for the company after a
specified period of time. This method
brings benefits to both employers and
empl oyees i n t erms of mot i vat i ng
employees to improve performance
and increase business for the company.
Empl oyers must t ake not e t hat al l
salaries and bonuses are subject to
personal income tax in Vietnam.
Other allowances and
benefts
Apart from salary and bonuses, an
employee may be entitled to several
kinds of allowances and monetary
or non- monetary benefits designed
to retain staff. Some allowances and
benefts are subject to personal income
tax although some are also not.
Taxabl e benefi t s i ncl ude housi ng
rent, payments for power, water and
associated services for employees
amounting to more than 15 percent of
total taxable income; transportation
allowance; premiums for life insurance;
health care services; entertainment;
sports and athletics; or membership fees
to golf clubs, tennis courts and other
exclusive clubs.
Some are considered tax exempted in
cases of housing beneft worth less than
15 percent of the total taxable income;
t r anspor t at i on and ent er t ai nment
allowance if they are used on a share
basis and the individuals name is not
specifically mentioned, or mid-shift
meal allowances given by employers.
Prefxed lump sum amounts or khoan
chi amounts for telephone, stationery,
uniforms and per diem allowances are
not subject to tax if the amounts are
within the levels set out under relevant
regulations.
Foreigners working in Vietnam are now
exempted from personal income tax
for various benefits such as relocation
allowance for the employees moving
into the country; the home leave airfare;
and school fee for the expatriates
children paid by the employer following
the labor contract.
For more information or advice on
managing payroll in Vietnam, please
e-mai l Dezan Shi ra & Associ at es
at vietnam@dezshira.com or visit
www.dezshira.com.
7 Vietnam Briefng | 2010
Mandatory Benefts
for Employees
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
V
ietnams social security
scheme, the mandatory
benefi t s appl i ed for
employees working in
Vietnam, includes three
categories:
Social insurance
Health insurance
Unemployment insurance
This scheme applies to all domestic and
foreign companies operating in Vietnam
that employ workers under the labor
contracts with a definite term of over
three months and for labor contracts
with indefnite terms.
Contributions to social security are
based on the employees monthly salary
or wage stated in the labor contract
and is capped at 20 times the legal
standard minimum salary regulated by
the government in cases wherein the
salary is equivalent or higher than 20
times of minimum salary. The minimum
salary for government and state-owned
company employees has been increased
to VND730,000 from VND650,000
starting May 1, 2010.
Cont r i but i ons a r e wi t hhe l d by
employers who will register and pay
soci al , heal t h and unempl oyment
insurance on behalf of their employees
at the provincial Department of Labor,
Invalids and Social Affairs monthly.
Social and unemployment insurance are
compulsory only for Vietnamese staff,
while health insurance applies to both
Vietnamese and foreign staff employed
following Vietnams labor code.
Social insurance
Employers and employees are required
to make contributions to the State Social
Insurance Fund equal to 16 percent
of gross income from the employers
and 6 percent from employees. Those
per cent ages wi l l be i ncr eased by
1 percent every two years starting
from January 2010 until it reaches 18
percent for employers and 8 percent for
employees.
For empl oyees wor ki ng under an
empl oyment cont r act t hat i s l ess
than three months in duration, social
insurance will be inclusive to their
salary for the spontaneous payment
of their social insurance fund or other
i nsur ance f or ms. Empl oyees wi l l
be given social insurance books for
keeping track of all social insurance
payments.
The fund covers employee benefits
including sick leave, maternity leave,
allowances for work-related accidents
and occupational diseases, retirement,
and survivors benefts.
Sick leave allowance
Si ck l eave al l owance i s gi ven t o
employees who are ill, recovering
from an accident, or taking care of
sick children less than seven years
old. Applicable allowance and leave
days vary depending on the number of
years the employees have paid social
insurance. The maximum time granted
per year for sick leave is 30 days in
cases of less than 15 years of social
insurance payment, and can be increased
to 60 days in case the employees have
paid more than 30 years insurance. The
allowance granted in lieu of salary is
equal to 75 percent of the salary of the
previous months contribution.
Cert i fi cat i on from a medi cal care
establishment is a must to claim for sick
leave allowance.
Maternity allowance
Employees are entitled to maternity
benefits not only when giving a birth,
but also when adopting children less
than four months old provided that
t hey have made soci al i nsur ance
contributions for six months and within
twelve months before childbirth or
adoption. On average, female employees
have the right to take maternity leave
for four months. If giving birth to twins
or more, employees are entitled an
additional 30 day leave for each extra
child.
Female employees are also entitled
t o t ake a one- day- l eave f or each
prenatal check-up, with a maximum
of five. Furthermore, they can enjoy
maternity benefits for miscarriage,
abortion or stillbirth, and even for
taking contraceptive measures such
as implanting an intrauterine device
or sterilization measures although
the number of leave days is less than
standard cases.
Maternity allowance is paid to the
benefi ci ari es and i s equi val ent t o
100 percent of the six month average
contribution preceding the leave. In
addition, employees are entitled to a
Mandatory Benefts for Employees
8 Vietnam Briefng | 2010
lump-sum allowance equivalent to two
months of standard minimum salary for
each child upon giving birth or adopting
a child of under four months old.
Allowance for work-
related accidents and
occupational diseases
Employees will enjoy allowance for
work-related accidents or diseases if
they suffer from a working capacity
decrease of at least 5 percent. In cases
where the decrease is between 5 percent
and 30 percent, employees are entitled
to a lump-sum allowance and more than
30 percent qualifes them for a pension.
A higher allowance is given for a bigger
ratio of labor capacity loss.
Employees suffering from a working
capacity decrease of at least 81 percent
will be entitled to an attendance pension
equivalent to the standard minimum
sal ar y i n addi t i on t o t he pensi on
mentioned above. If an employee dies
due to work-related injury or disease,
the family shall be paid a lump-sum
allowance equivalent to 36 months of
standard minimum salary.
Pension allowance
Pension is granted to a female employee
of 55 years old or a male employee of
60 years old with at least 20 years of
social insurance contribution. A lower
pension will be granted to some cases,
which do not meet these aforementioned
requi rement s but meet some sub-
requirements.
Monthly pension is calculated upon
the number of years of social insurance
contribution and the average monthly
salary identified for monthly social
insurance payment. The maximum
rate is equivalent to 75 percent of the
average salary while the lowest pension
is equivalent to the standard minimum
salary.
Empl oyees who have made soci al
insurance contributions of more than 30
years for men and 25 years for women
are entitled to an old-age grant which
is 0.5 percent of the average salary for
each multiplied by the extra years that
they contributed. For example, a man
retiring after working for 34 years will
receive an old age grant of 0.5 percent
multiplied by the extra four years of
contribution.
For those ineligible to avail of pension,
a lump-sum allowance will be granted
depending on years of social insurance
contribution. For each year, employees
are entitled to one and a half of their
average monthly salary.
Mortality allowance
Upon death, whether the employee is
paying into social insurance, deferring
payment between jobs, or collecting
monthly pension or allowance for a
work injury or occupational disease, an
allowance equivalent to the 10 month
standard minimum salary will be paid
by the social security fund to cover the
funeral. Upon meeting requirements,
a survivor allowance equivalent to 50
percent or 70 percent of the standard
minimum salary shall be given to the
family or relatives of employees on a
monthly basis.
Health insurance
In the past, Vietnams social security
scheme only applied to Vietnamese staff
and expatriates were exempted from
contributing to the social security funds.
However, according to new regulations
on health insurance valid from October
1, 2009, foreign employees working
in Vietnam under labor contracts with
indefinite terms or a definite term of
over three months will be subject to the
mandatory health insurance scheme in
the same manner as Vietnamese staff.
Health insurance cards shall be issued
to participants. Bearers of compulsory
health insurance cards are entitled to
the health insurance regime for medical
examination and treatment of inpatients
and outpatients at authorized medical
establishments.
Pri or t o 2010, t he mont hl y heal t h
insurance premium was equal to 3
percent of employees monthly salaries
or wages, of which 2 percent shall
be paid by employers and 1 percent
by employees. Beginning this year,
such r at es wer e i ncr eased t o 4. 5
percent of which 3 percent will be
paid by employers and 1.5 percent by
employees. Employees working under
less than three month employment
contracts can receive salary with health
insurance included like social insurance.
Unemployment insurance
Unemployment insurance is applicable
starting January 1, 2009 which requires
1 percent to be paid by the employer
and another 1 percent to be paid by the
employee. This type of insurance will
make employees ineligible to receive
severance pay when a labor contract is
terminated beginning January 1, 2009,
unless the company does not register
and pay unemployment insurance for
their employees during that period.
Jobless persons are entitled to three
months unemployment allowance if
they have contributed to the insurance
fund for less than 36 months and at
least 12 months. They can avail of six
months worth of benefits if they have
contributed to the fund for 36 to 72
months; nine months of benefts if they
have contributed to the fund for 72 to
144 months and 12 months allowance
if they have contributed for more 144
months to the fund. The unemployment
allowance is equal to 60 percent of
the persons former average six month
salary. Jobless persons are entitled to
health insurance benefts. They can avail
of an apprenticeship for a maximum six
months in addition to free employment
consultancy and recruitment services.
For more adv i c e on t hi s t opi c ,
e-mail Dezan Shira & Associates at
vi et nam@dezshi ra. com or vi si t
www.dezshira.com.
Mandatory Benefts for Employees
9 Vietnam Briefng | 2010
Summary of social security contributions for both employers and employees
Year Social insurance Health insurance Unemployment insurance Total
contribution
Employer Employee Total Employer Employee Total Employer Employee Total
< 2010 15% 5% 20% 2% 1% 3% 1% 1% 2% 25%
2010-2011 16% 6% 22% 3% 1.5% 4.5% 1% 1% 2% 28.5%
2012-2013 17% 7% 24% 3% 1.5% 4.5% 1% 1% 2% 30.5%
From 2014 18% 8% 26% 3% 1.5% 4.5% 1% 1% 2% 32.5%
Vietnam ranked 103 overall in terms of
flexibility in the regulation of hiring,
working hours and dismissal in a
manner consistent with the conventions
of the International Labor Organization
accordi ng t o t he Doi ng Busi ness
2010 project conducted by the World
Bank. This ranking was measured
based on t he f ol l owi ng i ndi ces:
rigidity of employment, the difficulty
of hiring, rigidity of hours, difficulty
of redundancy, and firing cost in the
country.
According to the study, the rigidity of
employment index is the average of the
difficulty of hiring index, the rigidity
of hours index, and the difficulty of
redundancy index. The difficulty of
hiring index measures the applicability
and maximum duration of fixed-term
cont ract s and mi ni mum wage for
trainee or first-time employee while
the rigidity of hours index looks at the
scheduling of nonstandard work hours
and annual paid leave.
The difficulty of redundancy index
gives quantitative value to notifcation
and appr oval r equi r ement s f or
termination of a redundant worker or a
group of redundant workers, obligation
to reassign or retrain and priority rules
for redundancy and reemployment.
Lastly, fring cost measures the notice
requirements, severance payments
and penalties due when terminating a
redundant worker in terms of weeks of
salary.
The Doing Business project regularly
measures and compares regulations
relevant to the life cycle of a small- to
medium-sized domestic business in
183 economies.
Employing Workers in Vietnam
Doing Business 2010 ranking of Vietnam in employing workers as compared to good practice and selected economies:
Employing Workers Global Rank
180
160
140
120
100
80
60
40
20
0
1
52
61
103
107
115
149
A
u
s
t
r
a
l
i
a
T
h
a
i
l
a
n
d
M
a
l
a
y
s
i
a
V
i
e
t
n
a
m
I
n
d
o
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e
s
i
a
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a
o

P
R
D
P
h
i
l
i
p
p
i
n
e
s
22
20
18
16
14
2007 2008 2009
Rigidity of employment index (0-100)
Vietnam East Asia & Pacifc
100
80
60
40
20
2007 2008 2009
Redundancy costs (weeks of salary)
Vietnam East Asia & Pacifc
The following graphs illustrates employment indicators in Vietnam over the past three years:
Source: The World Bank Group, Doing Business 2010
10 Vietnam Briefng | 2010
The Urban Renewal of Hanoi
and Ho Chi Minh City
[ By Joyce Roque, Vietnam Briefng ]
V
i et nams t wo maj or
business centers Hanoi
and Ho Chi Minh City
are expanding the scope
of their urban areas to
accommodate the infux of foreign and
local investment.
Currently the countrys business capital
and largest city, Ho Chi Minh City, is
struggling to contain its growth. Traffc
jams are a common occurrence. A 15
minute trip to the airport can easily
turn into more than an hours journey
during peak hours. Ho Chi Minh City
has a population of 7.1 million people
as of 2009 and is projected to grow to
10 million by 2010. The city needs to
develop its public infrastructure to meet
the needs of its burgeoning population
and expanding economy. Downtown
real estate prices have been unstable in
the past years because of lack of supply.
The local government has decided to
address this issue by developing new
urban centers.
These new urban centers will include
the Thu Thiem city center in District
2 and the Phu My Hung urban area in
District 7. Thu Thiem city center is a
737 hectare area strategically located
within Ho Chi Minh Citys northeast
growth corridor. It is opposite the
Saigon River and borders District 9
and the downtown areas of District 1,
District 7 and the Binh Thanh District.
The centers strategic location to the
Saigon River gives it the advantage of
easy access to a vital part of commerce
and transport in the city.
The Thu Thi em peni nsul a has 8. 5
kilometers of frontage along the river
which has its share of warehouses,
storage and shipping facilities. The
areas connection to the river will help
develop it further as a commercial
area that will connect the old and new
business centers of the city. While it
cannot replace or even recreate the
historic capitals distinct colonial
architecture, it will serve to showcase
the modern face of Vietnam as the city
embraces more commercial reforms.
Planning for the area began in 2003 and
construction is currently ongoing. Thu
Thiem is still open to infrastructure
investments and, once completed, it will
replace the historical city center as the
new city center consisting of residential
and office areas, pools, parks and 40
story buildings. The area will be linked
to downtown Ho Chi Minh City through
new bridges and roads. The government
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Regional Updates
11 Vietnam Briefng | 2010
has bui l t an east - west t unnel and
roadway in addition to the Thu Thiem
Bridge which opened in 2008. It is also
relocating ports along the Saigon River.
Another urban center is the 600 hectare
Phu My Hung New Ci t y Cent er i n
District 7 where a lot of the citys
international schools are found. The
area has the US$100 million Nguyen
Van Linh Avenue connecting it to the
Tan Thuan Export Processing Zone,
Saigon Port areas and the Mekong
Delta area. Top foreign companies
Unilever and Manulife have placed their
headquarters in Phu My Hung. On the
Nguyen Van Linh road there are also
residential sections with plans to build
a university, a high-tech center and a
nature reservation park in the future.
One of the major investors in the city
center is the Phu My Hung Corporation,
a j oi nt vent ur e company bet ween
Taiwan-based Central Trading and
Development Corporation and Tan
Thuan Industrial Promotion Company.
The company funded the construction
of Nguyen Van Linh Avenue and has
committed to build the Hiep Phuoc
Power Plant and Tan Thuan Export
Processing Zone.
Primarily designed by American and
Asian architects, the areas design has
already garnered recognition from the
Vietnamese government, the World Bank
and the American Institute of Architects.
Last year, the new Saigon Exhibition
and Convention Center opened adding
to other scenic projects in the area like
the Waterfront, Sky Garden, Riverside
and Phu Gia 99.
Ho Chi Minh City is also developing a
six line subway system, scheduled to be
fully operational by 2020, to alleviate
the citys worsening traffic situation
and lessen reliance on motorbikes
for transportation. The first line of the
metro subway system is slated to be
finished by 2014. The Japan Bank for
International Cooperation has promised
to provide US$904.7 million worth of
fnancing for the US$1.1 billion project.
Like Ho Chi Minh City, Hanoi has
begun pl ans t o s l owl y gr ow t he
city since 2008 as part of its grand
preparations to celebrate its 1,000 year
anniversary in October.
Hanois limits will stretch to include
adjacent provinces to make more space
for national projects in the capital city.
The expansion has already absorbed the
provinces of Hatay, Hoa Binh or Vinh
Phuc; making the old Hanoi with its
crawling French colonial architecture
the center of the new expanded city.
Plans to grow the scope of the city will
inevitably change its old-world charm
but hopefully spare the architecture
from its days as the capital of French
Indochina from being gobbled up by
skyscrapers. The citys construction
depart ment has announced i t wi l l
propose regulations to maintain the 970
state-owned French colonial-style villas,
although 804 of which are reportedly
being misused.
The decision to grow Hanoi will allow
it to attract more investment projects
as well as address real estate and labor
shortages, aspects that have hampered
the citys economic growth. According
to real estate company Savills, high
population density and limited land
for apartment project development
in the city center has moved demand
for apartments towards outer districts
where the infrastructure has been well
developed. It will also make Hanoi more
competitive when the city expands to
3,344 square kilometers.
Hanoi authorities have already approved
a US$314 million West Lake Urban
Area to be built in Nghia Do Ward in
Cau Giay District, Xuan La Ward in
Tay Ho District and Xuan Dinh and
Co Nhue Wards in Tu Liem District.
Despite being issued a license in 2006,
land clearance issues have stalled the
project from starting. The proposed
207 hectare urban center will feature an
administration center, a financial and
trade exchange center, and a cultural
center along with offce and residential
buildings to be constructed by South
Korean companies. The government is
set to initially transfer 20 hectares of
land for the first phase of the project
before the citys upcoming anniversary
in October.
When t he ci t ys ful l expansi on i s
achieved, population is expected to
jump from 6.5 million to 12 million
people. The master plan to develop the
city from its present size will continue
through 2030 and will involve slowly
growing Hanoi from a capital city into
a capital region with satellite townships
surrounding it.
There are also plans to build the Gia
Lam urban area and the Gia Lam science
and entertainment park by 2020 at a cost
of US$260 million and US$150 million
respectively. Each project will occupy
400 hectares of land and will be located
about eight to ten kilometers from
downtown Hanoi.
By 2015, former military airport Gia Lam
will be open to domestic fights to lessen
congestion in Noi Bai International
Airport. The newly renovated airport
is nearer to downtown Hanoi and only
15 minutes away by bus. It will have
an initial capacity to accommodate
162, 000 passengers annually, with
capacity increasing to 300,000 by 2025.
A proposal for the fnal master plan of
the city will be submitted at the National
Assembly this year. Until then plans to
develop the northern region along the
Hong River and relocate residents are
still pending approval.
In the end, the local governments of
Hanoi and Ho Chi Minh City will have
the responsibility of striking a delicate
bal ance bet ween devel opment and
heritage preservation that will hopefully
reinvent both cities without negating
their past.
For more i nf or mat i on on doi ng
b u s i n e s s i n Vi e t n a m, p l e a s e
e - mai l vi e t nam@de z s hi r a. c om
or visit www.dezshira.com.
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VIETNAM BRIEFING
The Practical Application of Vietnam Business
Daily Business News Available at
www.vietnam-briefng.com/news Volume III - Number II
Establishing
Representative Offces
in Vietnam
In This Issue:
ROs vs . Branches and WFOEs
Obtaining Foreign Work Permits
Foreign Contractor Applications in Vietnam
Regional Update: Vietnams Service Industry Bets on Ba Ria-Vung Tau
I
n this issue of Vietnam Briefng, we look at the process of establishing representative offces in Vietnam. As the second best performing
economy in the region this year, many foreign investors are now considering building a presence in Vietnam to take advantage of the robust
growth. A representative offce is the simplest way to do so initially as a company tests the viability of the Vietnamese market.
We also cover related topics that include comparing representative offces with branch and wholly foreign-owned enterprises to determine
which type is the most suited for your company; obtaining a foreign work permit in Vietnam; and regulations on applying as a foreign
contractor.
This issues regional update will discuss the booming prospects of Ba Ria-Vung Tau Province as it develops to become a southeast economic
region catering to foreign tourists and offering world-class gaming and luxury facilities.
The articles in this issue of Vietnam Briefng were written in coordination with the foreign direct investment and tax consultancy Dezan Shira
& Associates based in their primary offces in Hanoi. Please contact the frm at vietnam@dezshira.com if you have any questions.
Best regards,
Joyce Roque
Editor, Vietnam Briefng
This issues cover is courtesy of Vu Pham, a freelance photographer from Hue. This photo was taken at a traditional crafts village located three kilometers
from the city where incense makers display their colorful wares outside houses and shops. Vu is inspired by living in Hue and loves documenting the beauty
of daily life there. He graduated with a BA in English at Hue University in 2002 and has previous experience working as the chief communications offcer
for a Netherlands-based NGO and a reporter for e-journals and magazines. To see more photos, please visit www.fickr.com/photos/wuinvietnam or contact
vu.phamvan@gmail.com.
All materials and contents 2010 Asia Briefng Ltd.
No reproduction, copying or translation of materials without prior permission of the publisher. Contact: editor@vietnam-briefng.com
Welcome to the Summer Issue of Vietnam Briefng!
Complete information about the frm, staff, practice, services offered,
China / Hong Kong / India / Vietnam business advisory and tax information.
www.dezshira.com
Senior Vietnam personnel:
Alberto Vettoretti
Managing Partner
Vietnam
Hoang Thu Huyen
Country Manager
Hanoi
Resources:
Our Asia web site commenting on matters on trade, investment, political relations and comparisons
between the emerging nations of China and India.
www.2point6billion.com
3 Vietnam Briefng | 2010
Establishing Representative
Offces in Vietnam
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
R
epresentative offce help
companies effectively
g a u g e t h e b u s i n e s s
environment in Vietnam;
allowing them to conduct
their own market research and study the
industries that interest them. They are
a liaison offce for the parent company
that pursues business opportunities for
the overseas headquarters in providing
economi c, t r adi ng sci ent i f i c and
technical services.
However, an RO cannot engage
business directly with local companies
since it is forbidden to conduct any
revenue-generating activities. It is
not al l owed t o ei t her promot e t he
parent companys goods or services or
directly enter into contracts with local
companies unless a written power of
attorney is obtained. However, once the
contract is signed between the parent
company and Vietnamese companies
and organizations, an RO can help
ease the execution of contracts on
economic cooperation, trade, scientific
and t echni cal commi t ment s. Thi s
stipulation goes on further to forbid an
RO to issue and use its own invoices.
This is an advantage because it reduces
the accounting and tax compliance
burden for an RO; making it the most
inexpensive entity for foreign businesses
in Vietnam.
Required documents
Copies of the documents detailed below
must be certified by the Vietnamese
consulate in the country where the
headquarters is located. It must also be
translated into Vietnamese and certifed
by authorized agencies in Vietnam
or abroad. The required documents
include:
Cer t i f i cat e of i ncor por at i on or
business registration certificate of
t he parent company; i n case t he
above document does not show the
business lines of the company another
government cert i fi ed document
showing that information must be
provided
Me mor a ndum a nd a r t i c l e s of
association or company charter
An audit report of the company for
its latest financial year issued by an
auditing company
The company mus t al s o pr epar e
duly signed copies of the following
documents: the RO application letter
and the chief representative appointment
letter.
These documents must be submitted
i n Vi et namese t oget her wi t h t he
signature of authorized representative
and company chop or seal. In case the
company does not have a common
seal, a government certified document
ver i f yi ng t he aut hent i ci t y of t he
authorized representatives signature
will be considered.
Rental documents
The foreign company must submit the
original copy of offce lease agreement
in Vietnamese to submit to authorities.
It is necessary to verify that the landlord
is certifed to rent the offce. Sometimes
though it is not compulsory to submit
these documents when applying for an
RO establishment license.
Application procedures
Initially, a foreign company wanting
to establish a representative office in
Vietnam must frst submit an application
f or a l i c e ns e t o t he Pr ovi nc i a l
Department of Industry and Trade.
After official approval, the new RO
must publish a notice of operations in
a print or online newspaper for three
consecutive issues. This must be done
within 45 days from the issuance date
of the license. The notice must include
the ROs name, the name of its overseas
parent company, office location, and
chief representative to name a few.
The RO must then proceed to making
a seal , openi ng bank account and
obtaining work permit for expatriates.
The ROs chief representative should
be responsible for personally obtaining
the official seal for security reasons.
The application process can take three
to five weeks. An RO license is valid
for five years with an option to renew
afterwards.
Hiring staff
There i s no cap on t he number of
local and expatriate employees that
a representative office can hire for as
long as their employment is properly
document ed. Al l expat r i at e hi r es
including the chief representative are
required to get a work permit.
The chief representative
The chief representative can be a local
or expatriate hire. This person will
not allowed to concurrently hold the
following positions during tenure:
head of a branch in Vietnam; legal
representative of the foreign entity
allowed to sign contracts without written
power of attorney from such foreign
entity; or being a legal representative
of an enterprise established pursuant
to the laws of Vietnam. A Vietnamese
chief representative must submit a
copy of their identity card or passport
while foreign chief representative must
provide a passport copy. Copies must
be certified by either local or foreign
authorities.
Offce location
An RO i s f or bi dden t o sub- l ease
office space. It is recommended that
investors consider renting office space
4
Establishing Representative Offces in Vietnam
Vietnam Briefng | 2010
in Grade A buildings. This guarantees
the availability of modern facilities and
centralized location.
Tax matters
F o l l o wi n g Vi e t n a me s e l a w, a
representative offce will be responsible
for declaring its employees personal
income tax. An RO will not be liable to
pay Vietnamese corporate income tax
but will be liable to pay value added tax
on goods and services rendered at a rate
of 10 percent.
License changes
In cases wherein the RO needs to make
small changes to its license that involves
changing the chief representative,
office name, parent company address
or business registration, local address
within a province or city and scope of
business, it must submit documents to
the provincial Department of Industry
and Trade within 10 days from the date
the changes were made.
License re-issuance
T h e f o r e i g n b u s i n e s s h a s t o
appl y f or r e- i s s uance of l i cens e
for establishment of its representative
offce in the following cases:
Address of representative office
changes from one province or city
under direct central management to
another
Name or address of foreign business
i s changed from one count ry t o
another
The companys business lines are
changed
A full set of application dossiers must
be submitted for a new RO license to
the provincial Department of Industry
and Trade within 15 days since the day
the changes were made.
Closing a representative
offce
Represent at i ve offi ces wi shi ng t o
close operations can do so under the
following conditions:
If requested by the overseas parent
company
If the parent company closes down
If the parent company does not apply
for an extension on the expiration date
of the RO license
If the RO license was revoked by
Vietnamese authorities
If the government does not allow an
extension of RO license
For the first three conditions stated
above the parent company must submit
a notice of termination to authorities
at least 30 days prior to the end of
operations. For the other conditions,
aut hor i t i es wi l l make t he publ i c
announcement of RO termination.
Comparing an RO with a
branch or WFOE
An RO and branch office are both a
type of presence for foreign businesses
but not considered independent legal
entities. To set up an RO, the company
has to have been operated for no less
than one year since legal establishment
or valid business registration in the
country of origin. In contrast, a branch
offce requires that the parent company
has been operating for at least fve years
prior to application.
A wholly foreign-owned enterprise
does not require such conditions to
be set up. The investors of a WFOE
can be any foreign organization or
individual using capital in order to carry
out an investment activity in Vietnam,
provided that the investor is able to
submit the proper documents to prove
their legal presence or establishment in
the origin country. A WFOE is always
required to be attached to an investment
project to be approved.
Required capital
There is no capitalization requirement
for an RO and branch. They are set
up based on the business sectors on
which the parent companies operate.
An RO and branch run their business
in Vietnam as dependants of the parent
companies. They just receive money
and pay for costs and expenses arising
during their operation.
A WFOE in comparison has to register
its investment capital to get approval
from the state authority in Vietnam.
When the investment is accepted, the
capital will be transferred into a capital
bank account opened in a authorized
bank.
Permitted and prohibited
activities
While an RO functions as a liaison
off i ce f or t he par ent company t o
conduct market research in Vietnam
and to pursue the opportunities to do
business with local partners, the branch
is allowed to do business in Vietnam.
This means that a branch is allowed to
directly sign contracts with clients and
suppliers in Vietnam as well as issue
invoices. An RO is prohibited from such
direct proft-generating activities.
To some extent, the operation of branch
is quite similar to a WFOE. Both can
issue official invoices according to
the tax and accounting regulations.
They have to do regular tax filing for
both corporate and individual taxes.
Whereas the RO is only required to fle
employees personal income tax.
A branch is limited to business activities
stated in the business license of its
parent company. WFOE is allowed to
International Cost Comparisons
IN U.S. DOLLARS*
LOCATION FULL-TIME
MONTHLY
MINIMUM
WAGE
AVERAGE
RENTAL FOR
GRADE A
SPACE PER
SQUARE
METER, PER
MONTH **
CHINA
Beijing 141.70 29.12
Guangzhou 151.54 13.81
Shanghai 165 30.63
Shenzhen 162 17.65
VIETNAM
Danang 61.88 16
Haiphong 61.88 15***
Hanoi 69.68 39.66
Ho Chi
Minh City
69.68 37.51
*Based on the exchange rate US$1=RMB6.77 and
US$1=VND 19,230
**Based on fgures reported by real estate consultancy
frm CBRE
***According to CBRE, there are only Grade B
buildings in Haiphong
5
Establishing Representative Offces in Vietnam
Vietnam Briefng | 2010 5 Vietnam Briefng | 2010
do all business activities which are not
limited or prohibited under Vietnam
laws. They are free to pursue proft by
choosing the most suitable business
sectors for them in the location or
whenever they want.
Duration
Like the RO, the duration of a branch
is limited at fve years for each licence
of establishment. If they want to get
renewal of license, they have to submit
a set of dossiers to the state authority
of Vietnam who will examine if the RO
or branch makes any violation during
their operation or not, then to decide
to re-grant the licence for another five
years. Violations can include engaging
in business activities not stated in their
license of establishment or non tax
compliance.
The duration of a WFOE is dependent
wi t h t he dur at i on of i nves t ment
project and will not exceed 50 years as
regulated by law; typically from 30 to
50 years. The government can allow a
longer duration when necessary; for a
maximum of 70 years.
Offce choices
A Grade A office building is a good
choice for housing an RO or branch.
Serviced business centers have also
developed in Hanoi and Ho Chi Minh
City that allows staff to move in right
away. A company is prohibited to set up
in an apartment building. Otherwise, it
can choose any offce building or even
a private house for their offce provided
the landlords are licensed. For a WFOE,
offce location will be dependent on the
nature of their business.
Application procedures
and timing
As the establishment of an RO or branch
office is not considered an investment
pr oj ect . Appl i cat i on dossi er s ar e
submitted to the provincial Department
of Industry and Trade which is in charge
of supervising the operation of ROs and
branches in Vietnam. The license of
establishment for an RO or branch will
normally be granted within 25 days.
In comparison, the establishment of
a WFOE is always attached with an
investment project. The application
dossi er s wi l l be submi t t ed t o t he
provincial Department of Planning and
Investment and the investment license
granted by the provincial Peoples
Committee. For WFOEs located in
industrial parks, the application dossiers
will be submitted to the provincial
Management Board of Industrial Parks.
The t i mi ng r e qui r e d t o ge t t he
investment license for WFOE is varied
depending on the investment projects
scale, business sector, the amount of
capital. Typically, it will take one to
three months before an investment
license is released.
Labor
Representative offices, branches and
WFOEs have t he ri ght t o di rect l y
employ both Vietnamese and foreigners
to work for them. There is no restriction
on t he number of empl oyees. Al l
f or ei gner s wor ki ng f or ROs and
branches are required to obtain a work
permit.
There are a number of work permit
exemptions for WFOEs such as the
member of a limited liability company
with two or more members, the owner
of a one member l i mi t ed l i abi l i t y
company and members of the board
of management of a share hol di ng
company. Besides these exceptions, all
foreigners have to get a work permit,
even if they are the legal representative
or director of the company.
Tax and accounting issues
An RO i s t h e s i mp l e s t k i n d o f
est abl i shment i n t erms of t ax and
accounting. No corporate tax filing is
required, only personal income tax for
employees working for RO. Regarding
taxes, branches and WFOEs are quite
similar to each other. They have to fle
taxes, including corporate income tax,
value added tax or personal income tax
monthly and annually. Representative
offi ces, branches and WFOEs can
legally open bank accounts, RO may
onl y recei ve money di rect l y from
its parent company to pay for costs.
Branches and WFOEs can either receive
or transfer money abroad after fulflling
its tax obligations in Vietnam.
For more i nf or mat i on or advi ce
on est abl i shi ng a represent at i ve
of f i ce i n Vi et nam, pl ease cont act
De z a n S h i r a & A s s o c i a t e s a t
vi et nam@dezshi ra. com or vi si t
www.dezshira.com.
Items Representative Offce Branch WFOE
Parent company At least 1 year operation At least 5 year operation N/A
Capital required No No Depending on scope of business
Business scope Liaison offce, market
research
Trading, import-export Manufacturing, trading, import-export
Duration 5 years 5 years 30-50 years
Location Commercial building Commercial building Commercial building or Industrial Parks
Licence-issuing
body
Provincial Department of
Industry and Trade
Provincial Department of
Industry and Trade
Provincial Department of Planning and Investment,
Provincial Management Board of Industrial Parks
Setup timing 25 days 25 days 1 3 months
Recruiting staff Hire/pay directly Hire/pay directly Hire/pay directly
Taxation Personal income tax Corporate income tax, value
added tax, personal income tax
Corporate income tax, value-added tax, personal income
tax
Invoicing Cannot issue invoices Can issue invoices Can issue invoices
6 Vietnam Briefng | 2010
Obtaining Foreign Work Permits
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
W
or k per mi t s f or
f o r e i g n e r s i n
Vietnam are valid
for a maximum of
three years.
There are currently around 60, 000
foreign employees in the country with
valid work permits and around 20,000
illegal employed foreigners using tourist
visas. Authorities are now becoming
stricter when it comes to foreigners
wor ki ng i n t he count r y wi t hout
obtaining a proper work permit. Persons
who violate the regulations will be
penalized or even deported back to their
home countries if they cannot meet the
work permit requirements.
Conditions
For ei gn nat i onal s wor ki ng i n t he
country for companies, organizations,
or individuals must comply with certain
conditions to qualify for a work permit.
These include the following:
Must be at least 18 years of age
Must be in good health as necessary
to satisfy the job requirements
Must be a manager, executive director
or expert with technical skills and
knowledge applicable to the job
Must not have a criminal record and
currently not subject to criminal
prosecution or any criminal sentence
in Vietnam or overseas
An employer is permitted to recruit
foreign workers who fully satisfy the
above conditions in order to work as
managers, executive directors and
experts where local hires are not yet
able to meet production and business
requirements. Foreign employees in
the country are required to present
their work permit during immigration
procedures and when requi red by
authorized state agencies. Illegally
employed foreign employees will be
automatically deported from the country
and the hiring company penalized.
Exemptions
Foreign nationals are exempted from
obt ai ni ng a wor k per mi t i n cases
wherein:
The foreign national is working in
Vietnam for less than three months
The foreign national is a member of
limited liability company with two
members and above
The foreign national is the owner of
a limited liability company with only
one member
The foreign national is a member of
the board of a joint stock company
The foreign national is coming to
Vi et nam t o market product s and
services
The foreign national is coming to
Vi et nam wi t hi n t hree mont hs t o
r esol ve an emergency si t uat i on
o r t e c h n o l o g i c a l l y c o mp l e x
s i t ua t i on t ha t r i s ks a f f e c t i ng
production business which Vietnamese
experts or foreign experts currently in
Vietnam are unable to solve
Foreign lawyers granted a professional
permit in Vietnam.
Referring to the list above, one should
be aware that the following would still
be required to obtain a work permit in
Vietnam:
Chief representative of ROs
Director of branches
General director or director of foreign-
i nvest ed compani es i n Vi et nam,
regardless if companies are LLCs or
JSCs
As mentioned above, a foreigner who
is member of a company in Vietnam is
exempted from a work permit. Under the
Enterprise Law of Vietnam, a member
of a company can be either an individual
or a corporate.
As for Decree 34/ 2008/ NDCP, i t
is unclear whether a foreigner who
is appointed by a foreign corporate
member of a LLC in Vietnam will still
be exempted from obtaining a work
permit or not. From practical experience,
a work permit is still required from such
foreigners as cited by the Department
of Labor, Invalids and Social Affairs
(DoLISA) Hanoi and Ho Chi Minh City.
A work permit is not necessary when
the foreigner comes to Vietnam to offer
services. However, in this case, the
Obtaining a Foreign Work Permit in Vietnam
7 Vietnam Briefng | 2010
person must submit a seven day advance
notice to the provincial Department of
Labor, War Invalids and Social Affairs
prior to working in Vietnam.
Termination of work permit
A work permit may be terminated in the
following circumstances:
Expiration of work permit
Termination of labor contract
The content of labor contract is not
consistent with the granted work
permit
Expi rat i on or t ermi nat i on of t he
business, trade, finance, banking,
insurance, science and technology,
culture, sports, education, or medicine
contracts
When foreign employer announced
the termination of the foreign national
working in Vietnam
Wi t hdr awal of wor k per mi t by
authorized state agencies
Termi nat i on of operat i on of t he
company, organization, and partners
in Vietnam

The foreigner is sentenced to prison,
dies or is proclaimed missing by court
Fees
Work permit related fees include:
A work license: VND400,000/permit
R e n e w i n g a w o r k l i c e n s e :
VND300,000/permit
E x t e n d i n g a wo r k l i c e n s e :
VND200,000/permit
Application procedures
Application dossiers need to include the
following:
Application for issuance of work
permit of the labor users
Registration slip on proposed foreign
recruitment based on the standard
form prescribed by the Ministry of
Labor, War Invalids and Social Affairs
Criminal record form issued by the
competent authority from the foreign
countries they lived; in cases where
the foreigners have resided in Vietnam
for over six months, they should also
submit the form of criminal record
issued by the Department of Justice in
the locality where they are residing
Curri cul um vi t ae of t he forei gn
applicant following the format set by
the Ministry of Labor, War Invalids
and Soci al Affai rs, i ncl udi ng an
attached photograph of the foreigner
Medical certificate issued overseas;
if the laborer is residing in Vietnam,
the health certifcate must be granted
under the regulations of the Health
Ministry
Legal copies of certifcates as proof of
professional skills such as: bachelor,
master, doctor and certificates on
qualifcations granted overseas. If the
applicant is a craftsman of traditional
crafts or a person having experience,
but no formal certificate, written
documents provided by authorized
agencies in their home countries
must be submitted attesting to their
qualifications and experience of at
least fve years
Three color photos (3cm x 4cm) of the
applicant
The application process is highlighted
below:
Labor users take responsibility of
preparing a dossier following law
provisions and submit to Department
of Labor, War Invalids and Social
Affairs
The work permit shall be granted 15
working days from the date of receipt
of the completed application dossier.
One is advised to seek professional
help when applying for an expatriate
work permit in Vietnam. Many foreign
applicants have been confused about
the procedure and requirements when
applying; leading to unnecessary delays
and penalties.
For professional advice on applying
for work permits in Vietnam, please
contact Dezan Shira & Associates at
vi et nam@dezshi ra. com or vi si t
www.dezshira.com.
8 Vietnam Briefng | 2010
Foreign Contractor
Applications in Vietnam
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
F
or ei gn bus i nes s es ar e
c o n s i d e r e d f o r e i g n
contractors if they conduct
business or earn income in
the country under contract
with local organizations and individuals.
Usually, foreign contractors are the
winners of auctions organized by the
Vietnamese government or organizations
and may be pri nci pal cont ract ors,
gener al cont r act or s, par t ner shi p
contractors or subcontractors.
There are regulations covering the
activities of foreign contractors in
Vietnam. Depending on the nature of
business, contractor activities shall be
subject to specific sector regulations,
including construction, and technology
transfer.
Requirements
To become a forei gn const ruct i on
contractor or subcontractor in Vietnam,
an applicant must satisfy the following
conditions:
Win a project bid in Vietnam
Commi t t o empl oy Vi et namese
subcontractors to complete the project
Be fnancially stable in the last three
years
Have access to stable facilities and
manpower
Construction contractor
license application
Foreign businesses have to register to
the state authority to become foreign
contractors or subcontractors. The
appl i cat i on must be submi t t ed t o
different government groups depending
on the scale and scope of the projects.
For example:
The Ministry of Construction for
Group A projects or projects to be
carried out in two provinces or more
The pr ovi nci al Depar t ment of
Construction for Group B and C
projects

Dossiers of application for contracting
license include three sets one original
and t wo copi es of t he fol l owi ng
documents:
Application letter
The bidding result or the decision
on selection of the contractor or the
lawful contract
Documents related to the contractors
legal status; including the business
r e g i s t r a t i o n c e r t i f i c a t e , t h e
incorporation license and company
charter
Report on experiences related to
contracted work and a fnancial audit
report in the last three years
The part nershi p cont ract wi t h a
Vietnamese contractor or the written
commitment to employ Vietnamese
subcontractors
Authorization letter for persons other
than the contractors representative at
law
Applications for contracting licenses
mu s t b e ma d e i n Vi e t n a me s e .
Documents in foreign languages must
be t ransl at ed i nt o Vi et namese and
the translations notarized following
Vietnamese regulations.
Other foreign papers and documents
must be verifed by the consulate, unless
otherwise specifed by Vietnamese laws
or international agreements.
Foreign Contractor Applications in Vietnam
9 Vietnam Briefng | 2010
The contractor license will be issued
wi t hi n 20 days f r om t he dat e of
submission of completed documents.
Application for project
offce
Once the construction contractor license
is received, the contractor must submit
one set of the application file to the
provincial Department of Construction
to register its project office. Required
documents include:
Application letter
Cer t i f i ed copy of cons t r uct i on
contractor license
After filing, the project office license
will be issued within fve days from the
date of submission.
Permitted activities
Once licensed, foreign construction
cont ract ors are al l owed t o do t he
following:
Lease offce
Have a seal of project offce
Open bank accounts with local banks
Use the Vietnamese accounting system
Employ local and foreign laborers
a c c o r d i n g t o t h e Vi e t n a me s e
labor legislation; for expatriates,
t he cont ract or can onl y regi st er
managerial and technical experts and
highly skilled laborers for entry into
Vietnam
The foreign contractor will be held
responsible for fling the PIT documents
for all its employees.
Taxation
Foreign contractors and sub-contractors
in Vietnam are liable to pay the same
tax rates applicable to local companies
including import-export duties, personal
i ncome t ax ( PI T) and ot her t axes
required by authorities.
In particular, corporate income tax (CIT),
and value-added tax (VAT) for foreign
contractors are different depending on
the methods of payment. There are two
methods available as follows:
Or di nar y met hod: VAT and CI T
payments will be filed at the same
ma nne r a nd t a x r a t e s a s l oc a l
companies; foreign contractors will be
allowed to follow the ordinary method
if they satisfy the following conditions
Having a permanent establishment or
resident status in Vietnam
The business duration in Vietnam
under a contractor or sub-contractor
contract is 183 days or more from the
effective date of the contract
Must apply the Vietnamese accounting
system to their business

St r ai ght met hod: Thi s met hod
i s appl i cabl e when t he f or ei gn
cont r act or s do not meet one of
conditions mentioned above; the
base to calculate VAT and CIT is the
taxable revenue
VAT r a t e s v a r y f r o m 3 0 t o 5 0
percent subject to the business line:
services, production, transportation
or cons t r uct i on wi t h or wi t hout
supplies. The VAT rate is calculated by
multiplying the taxable revenue with the
rates found in the accompanying chart.
Payable CIT varies between 0.1 percent
and 10 percent of the taxable revenue,
subject to the business line: trading,
services, construction, and production,
among others.
For more information on applying for
a foreign contractor license in Vietnam,
please contact vietnam@dezshira.com
or visit www.dezshira.com.
VAT RATES
No. Business line Percentage (%) of added value to turnover for VAT calculation
1 Services, machinery and equipment lease, insurance 50
2 a/ Construction, installation with materials or machinery,
equipment attached to construction works
30
b/ Construction, installation without materials or machinery,
equipment attached to construction works
50
3 Transportation, production, other business 30
CIT RATES
No. Business line CIT rate (%) based on turnover for CIT calculation
1 Trade: distribution and supply of goods, raw materials, supplies, machinery
and equipment accompanying services in Vietnam
1
2 Services, machinery and equipment lease, insurance 5
3 Construction 2
4 Other production and business activities, transportation (by sea and air) 2
5 Lease of aircraft, aircraft engines, spare parts of aircraft, ships 2
6 Reinsurance 2
7 Securities transfer 0.1
8 Loan interests 10
9 Copyright incomes 10
10 Vietnam Briefng | 2010
Vietnams Service Industry
Bets on Ba Ria-Vung Tau
[ By Joe Drury ]
T
he winds of change are
sweeping across Ba Ria-
Vung Tau Pr ovi nce i n
Vi e t n a m s b o o mi n g
s o u t h e a s t e c o n o mi c
region, and they are fragrant with the
scent of gambled winnings and Dom
Prignon.
Traditionally an industrial center of
Vietnam, a recent food of service sector
investment hopes to transform the local
economy into an international tourists
dream of luxurious living and gambling.
What is happening in Ba Ria-Vung
Taus i s happeni ng i n t he r est of
Vietnam, where nearly 77 percent of
total foreign direct investment (FDI) is
now committed to the service sector,
a drastic shift from the steady seven
percent ratio in the last decade.
Unclear FDI standards and difficulties
cl ear i ng l and have l ed t o capi t al
disbursement delays, forcing many
projects to a standstill and imperiling
the provinces future.
Ba Ria-Vungs predicament provides a
cautionary test for this countrys former
centralized economy as it strives to
avoid the extremes of bureaucracy.
Welcome to Ba Ria-Vung
Tau
Vietnams southeast economic region
is the powerhouse of the countrys
i nvi gorat ed economy. Thanks t o a
coordinated infrastructure replete with
highways, railroads, ports and airports
linking Vietnams special economic
zones and industrial parks to the outside
world, the region produces 47.4 percent
of the countrys industrial output and
is responsible for 61 percent of total
foreign invested projects in Vietnam.
An important player in this activity is
Ba Ria-Vung Tau Province. With an
area of 1,982 square kilometers and
a population of 995,000, it shares the
border with Dong Nai Province to the
north, Binh Thuan Province to the east
and Ho Chi Minh City to the west.
Ba Ria-Vung Tau connects Vietnam to
the world with a developed network of
deep seaports, and fres its industry with
an extensive natural gas supply system.
Not surprisingly the provinces key
industrial sectors are in industry and gas
including petroleum, steel, fertilizer,
mechanical manufacturing, electricity
and construction materials.
The coastal city of Vung Tau is a hub
for Vietnams rich offshore oil industry
and is conveniently located next to
ports with direct shipping lines to the
United States. Within the Tan Thanh
industrial park, the Phu My electricity
pl ant s generat e 40 percent of t he
nations electricity and construction for
Vietnams largest steel mill recently
broke ground.
It is no great surprise then that the
province attracts a lot of attention from
international investors. In the first 11
months of 2009, Ba Ria-Vung boasted
the largest foreign investment of any
provi nce or ci t y i n Vi et nam, wi t h
US$6.73 billion in newly registered
capital and increased capital, far ahead
of second pl ace Quang Nam Bi ng
Duong at US$4.1 billion.
The province has so far managed to
repeat this success in 2010. According
t o Vi et nams For ei gn I nvest ment
Agency, Bao Ria-Vung Tau attracted
US$2.16 billion of FDI for 20 projects
in January-May 2010, 30 percent of
Vietnams total and the highest of any
province in Vietnam.
What happens in Vietnam,
stays in Vietnam
As great as its industrial achievements
st and, Ba Ri a-Vung Taus forei gn
direct investment is now increasingly
channel ed i nt o t he servi ce sect or
following Vietnams accession into the
World Trade Organization (WTO) in
2007.
In order to integrate Vietnam into the
global economy, WTO commitments
r equi r ed openi ng t he mar ket t o
exported foreign goods and services.
New regulations included phasing out
industrial subsidies and allowing foreign
companies to establish foreign-owned
subsidiary banks and brokerages.
Results have been swift. Registered
FDI i n Vi et namese manufact uri ng
represented 62.9 percent between 1988
and 2006 before droppi ng t o 51. 5
M
e
ko
n
g
R
ed
Yu Jiang
Black
Mekong
M
ekong
Lam Nam
C
hi
Mae Nam Mun
X
e Kong
Tonle Srepok
M
e
k
o
n
g
M
e
k
o
n
g
Gu l f
o f
T h a i l a n d
To n l e
Sa p
So u t h
Ch i n a
Se a
Gu l f
o f
To n k i n
Cu Lao Thu
Con Dao
Hon Sao
Hon Khoai
Dao Phu
Quoc
(VIETNAM)
Cu Lao Re
Cu Lao Cham
Hainan
Dao
Dao Bach
Long Vi
Dao Cai Bau
CHI NA
L AOS
T HAI L AND
VIETNAM
KAMPUCHEA
CHI NA
Simao
Mengzi
Lao Cai
Cao Bang
Lang Son
Lai Chau
Son La
Yen Bai
Beihai
Zhanjiang
Haikou
Jiaji
Sanya
Basuo
Hoa
Binh
Nam Dinh
Ha
Dong
Louang
Namtha
Phongsali
Xam Nua
Wenshan
Ha
Giang
Tuyen
Quang
Qinzhou
Guixian
Yulin
Xuwen
Jingxi
Pingxiang
Hong Gai
Vinh
Hue
Tam Ky
Quang
Ngai
Ninh Hoa
Xiangkhoang
Nan
Loei
Udon Thani
(Udorn)
Sakon Nakhon
Sisaket
Aranyaprathet
Sattahip
Pouthisat
Stoeng
Treng
Da
Lat
Ho Chi
Minh City
Svay
Rieng
Kampong
Spoe
Kampot
Ha
Tien
Long
Xuyen
Ca Mau
Bac
Lieu
Can
Tho
Tan An
Tra
Vinh
Soc
Trang
Rach
Gia
Sa
Dec
Batdambang
Nakhon
Ratchasima
(Korat)
Khon
Kaen
Thanh
Hoa
Hai
Duong
Haiphong
Dien Chau
Muang Pakxan
Nong Khai
Muang
Khammouan
Savannakhet
Phitsanulok
Ky Son
Ban
Ban
Ron
Dong Hoi
Quang Tri
Da Nang
Saravan
Attapu
Pakxe
Warin
Chamrap
Ubon
Ratchathani
Surin
Sara Buri
Sisophon
Krong
Kaoh Kong
Siemreab
Kracheh
Lumphat
Buon Ma
Thuot
Dak
Nong Loc
Ninh
Kampong
Thurn
Kampong
Cham
Trat
Rayong
Dac To
Kon Tum
Pleiku
Qui Nhon
Tuy Hoa
Nha Trang
Cam Ranh
Phan Rang-
Thap Cham
Phan Thiet
Vung Tau
My Tho
Ben Tre Vinh
Long
Bien Hoa
Thu Dau Mot
Tay
Ninh
Ha Tinh
Louangphrabang
Thai Binh
Ninh Binh
Bac Giang
Viet
Tri
Thai
Nguyen
Nanning
Ba Ria - Vung Tau
Vientiane
Hanoi
Phnom Penh
Bangkok
108 104
12
16
20
108 104
20
16
12
Vietnam
Road
River
International Boundary
National Capital
Regional Updates
11 Vietnam Briefng | 2010
percent in the three years after Vietnam
joined the WTO. Foreign investment
to the service sector jumped from 30.7
percent to 48.1 percent during the same
time.
On Jan. 1, 2009, HSBC Holdings opened
a wholly-foreign owned subsidiary in
Ho Chi Minh City with chartered capital
of US$180 million, the first overseas
bank to incorporate in Vietnam.
Hotel and restaurant projects garnered
t he most f or ei gn capi t al i n 2009,
attracting 40.9 percent of the countrys
total pledged FDI after lingering at just
4.2 percent in 2006.
Management and consultant projects
also drew impressive results, accounting
for 36 percent of national FDI in 2009
compared with 15.2 percent in 2006.
The national switch from manufacturing
to services is dramatically transforming
Vietnams economy, and Ba Ria-Vung
Tau is no exception.
In the service sector, investors are
not only developing tourism services
but also spending more in financial
and banking services, said Le Kim
Huong, director of Ba Ria-Vung Taus
Department of Planning and Investment
in a 2008 interview with the Saigon
Times.
Based on the 2008s investment trends,
Huong expect s t he ser vi ce sect or
to represent 40 percent of the local
economy by 2015, up 30 percent from
2008.
Tourism will lead this transition, as
investors are keen on Vietnams still
underdeveloped tourism industry that
will transform the country into a world-
class travel destination.
In 2009, the province attracted US$4.6
billion in tourism projects according
to the Vung Tau Promotion Investment
Center, a diverse array ranging from
animal parks and tourist complexes to
fve-star hotels with fower gardens and
golf courses.
By April of 2010, the province continued
to show strong numbers with a total of
159 tourism projects spread over 6,000
hectares and investment capital reaching
US$11.9 billion. Foreign investors
fnance an overwhelming 94 percent of
these projects.
Emblematic of the provinces new
economy is the largest of these new
developments: the MGM Grand Ho
Tram, a luxury Las-Vegas style casino
to be located 130 kilometers from Ho
Chi Minh City on the pristine Ho Tram
beach strip. Vancouver-based Asian
Coast Development Ltd. will develop
the US$4.2 billion project, whereas
MGM Mirage will manage the property
after completion.
In 2013, the resort will complete the
frst phase of development, opening its
doors to 550 luxury guest rooms, five-
star amenities, and a gaming area of
90 live tables, 500 electric games and
VIP facilities. The second phase of
development will add 550 guest rooms,
14 high-end private villas and 500 more
electronic games.
I believe frmly that supply has not met
demand in Asia, said Lloyd Nathan
former presi dent of MGM Mi rage
Global Gaming Development in an Apr.
2010 interview with Bloomberg. Nathan,
tapped to run the new Vietnam resort,
argues, Vietnam is going to thrive as an
alternative to Singapore or Macau.
Aside from the MGM Grand Ho Tram,
other ambitious projects include U.S.
company Good Choice USA-Vietnams
Tung Tau Wonderful World Theme Park,
to include an 88-story tower, conference
center, shopping malls and entertainment
centers, a US$120 million Chinese
international five-star hotel with 50
luxury villas, and a US$1 billion project
by Koreas JQ Urban Development.
Fear and loathing
Despite these rosy projections, the past
two years have exposed weaknesses in
Vietnams investment system. Many
investors in the tourism sector, local
and foreign, complain about projects
bei ng del ayed due t o probl ems of
site clearance and land allocation. On
the other hand, top-level government
officials worry about lax FDI approval
and licensing procedures leading to
bungled investments and ineptly delayed
construction.
These obstacles have resulted in low
levels of capital disbursement and
construction setbacks, pushing the
average completion time for projects
i n Ba Ri a-Vung Tau from ei ght or
ni ne years. Of t he provi nces 159
new projects, only ten projects are in
operation or under construction; 38
projects have just started construction
and the rest are in the midst of the
licensing procedure or drawing plans for
construction.
On a national level, Vietnam seems to
be sorting out its capital disbursement
problems. The Foreign Investment
Ag e n c y r e p o r t e d t h a t c a p i t a l
di sbur sement i n f or ei gn i nvest ed
projects rose by 7.1 percent year on
year in the frst fve months of 2010 to
US$4.5 billion.
As Ba Ria-Vung Tau continues to attract
more FDI throughout 2010, it remains
to be seen whether this national trend
will wind its way to this southeastern
province. With a better-enforced system
of government oversi ght and l and
clearance, the region may see its stellar
FDI fgures drop as quality of investment
becomes favored over quantity. But
such is necessary to uncork the bottled
up slowdown in development, assisting
the local markets transition from oil to
champagne.
For more i nf or mat i on on doi ng
b u s i n e s s i n Vi e t n a m, p l e a s e
e - mai l vi e t nam@de z s hi r a. c om
or visit www.dezshira.com.
Top Regional FDI (Jan-Nov 2009)
Ba Ria-Vung Tau
Quang Nam
Binh Duong
Dong Nai
Ho Chi Minh City
$1.58 bln
$2.35 bln
$2.5 bln
$4.1 bln
$6.73 bln
VIETNAM BRIEFING
The Practical Application of Vietnam Business
Daily Business News Available at
www.vietnam-briefng.com/news
Understanding
Vietnams Legal
Environment
In This Issue:
Investment Incentives and Forms of Direct Investment
Pre and Post Registration Procedures
Buying Real Estate as a Foreigner
Renting Offces in Vietnam
Vietnams New Arbitration Law

Volume III - Number III
In this issue of Vietnam Briefng we look at the legal environment for establishing a business in Vietnam as a foreign investor. There
are basically two laws that govern foreign direct investment in Vietnam: the Unifed Law on Enterprises and the Common Law on
Investment. We examine these two laws and review the sectors and regions entitled to investment incentives and conditional sectors
applicable to foreign investors. We also go through the different forms of foreign direct investment in Vietnam and cover some of the
pre and post-registration procedures. For those looking to rent or buy real estate in Vietnam, we look at some of the procedures and
discuss the pros and cons of renting versus buying. Finally, we examine the countrys new arbitration law that should help companies
resolve commercial disputes faster.
The articles in this issue of Vietnam Briefng were researched and written with the help of the Vietnam-based foreign direct investment
and tax consultancy Dezan Shira & Associates. Please contact them directly through their primary offces in Hanoi, and feel free to
sign up for our regular Vietnam Briefng bulletins and regular magazine as featured on the Vietnam Briefng web site. We look forward
to hearing from you.
Best regards,
Andy Scott
Managing Editor, Vietnam Briefng
This issues cover is courtesy of Ben and Steph Vander Steen. It shows lanterns displayed in the city of Hoi An, located in Quang Nam Province in south central Vietnam.
The area is famous for its display of colorful silk lanterns in addition to being a popular tourist destination. On the 14th night of each lunar month, Hoi An shuts off electric-
ity and uses lanterns to illuminate the city.
All materials and contents 2010 Asia Briefng Ltd.
No reproduction, copying or translation of materials without prior permission of the publisher. Contact: editor@vietnam-briefng.com
Welcome to Vietnam Briefng!
3 Vietnam Briefng | 2010
Understanding Vietnams
Legal Environment
[ By Hoang Thu Huyen, Dezan Shira & Associates ]
T
here are two main laws
that govern foreign direct
investment in Vietnam:
t h e Un i f i e d La w o n
Enterprises and Common
Law on Investment, which were passed
by the National Assembly on November
29, 2005 and entered into force on
July 1, 2006. These two laws and their
lower level legal documents cover most
aspects of the investment procedure in
Vietnam from business registration to
operations.
I n a d d i t i o n t o t h e s e l a ws , t h e
Commercial Law of 2006 stipulates
the condition and procedures necessary
to set up representative offices and
commercial branches in Vietnam.
Investment sectors and
regions entitled to incentives
The government encourages foreign
investors to focus in the following
sectors and regions:
Sectors in which investment is
entitled to incentives
High technology, scientific research,
and technological development
De v e l o p me n t o f i mp o r t a n t
infrastructure facilities for the state
Production of software products
Education and training, occupational
training, health care, culture, sport,
and the environment
Pr o d u c t i o n , c o n s t r u c t i o n , o r
t ransport at i on i ndust ri es whi ch
employ many female employees
Ent er pr i s es empl oyi ng et hni c
minorities
Regions in which investment is
entitled to incentives
Regions with diffcult socioeconomic
conditions, such as mountainous,
remote or underdeveloped regions
Industrial zones, export-processing
zones, economic and high-tech zones
4 Vietnam Briefng | 2010
Understanding Vietnam's legal environment
The gover nment r egul ar l y i ssues
lists of sectors and regions qualified
for investment incentives. The types
of incentives will be determined by
specific tax, land and other related
regulations.
Conditional investment
sectors applicable to foreign
investors
For some sectors, foreign investors are
only allowed to do business if they meet
conditions required by the Vietnamese
government.
Those sectors include:
Broadcasting and television
Pr o d u c t i o n , p u b l i s h i n g , a n d
distribution of cultural products
Mining and processing of minerals
Est abl i shment of i nfrast ruct ure
for telecommunications networks,
transmission and provision of internet
and telecommunications services
Est abl i shment of publ i c post al
networks and provision of postal
services and delivery services
Construction and operation of river
ports, seaports, airports and airfelds
Tr a n s p o r t a t i o n o f g o o d s a n d
passengers by rail, air, land and sea,
and inland waterways
Harvest of marine resources
Production of cigarettes
Real estate business
Investment in distribution
Education and training
Hospitals and clinics
The conditions may be in the form of
requirements for the establishment of
a company, the scope of project, the
amount of capital, the domestic and
foreign ownership structure of the
project, and the type of legal entity
allowed for the investment project,
to name a few. These conditions are
subject to revisions by the Vietnamese
government.
Forms of investment and
enterprises
According to the law, the main types of
foreign direct investment include: 100
percent foreign-owned enterprises; joint
venture between domestics and foreign
investors; investment in contractual
forms of business cooperation contracts;
build-operate-transfer contracts; and
build-transfer-operate and build-transfer
projects in which 100 percent foreign-
owned enterprises and JVs can be set
up in forms of separate legal entities
stipulated by the Law on Enterprises.
The Law on Enterprises allows foreign
investors to set up businesses as a
limited liability company (LLC) with
one member only or with two or more
members, as a joint stock company
(JSC), and as a partnership. For foreign
investors investing in Vietnam for the
first time, the new establishment of
an LLC or JSC will be required to be
attached to an investment project.
The investment certifcate shall also be
the business registration certificate of
the LLC or JSC. Furthermore, foreign
compani es wi t h ongoi ng busi ness
rel at i ons wi t h Vi et nam can set up
representative offces or branches.
Forms of direct investment
Foreign-owned enterprises
Under Vietnamese law, 100 percent
foreign-owned enterprises are a legal
ent i t y est abl i shed by one or more
foreign investors under a form of LLC
or a shareholding company or a JSC.
Joint ventures
A joint venture may be established as
an LLC with more than one member, as
a JSC or as a partnership and is a legal
entity with limited liability. Profit and
risk are distributed among the parties
in proportion to their charter capital
contributions to the JV unless the parties
have agreed to otherwise in the joint
venture contract.
Conver si on f r om a JV i nt o a 100
percent foreign-owned enterprise is
now allowed pursuant to the Investment
Law.
Business cooperation contracts
Thi s i s an agr eement s i gned by
multiple parties, typically by a foreign
investor and a local company with the
objective of jointly conducting business
operations in Vietnam on the basis of
mutual allocation of responsibilities
and sharing of profts or losses, without
creating or forming a legal entity in
Vietnam.
This form of business is usually used
for short and medium-term projects
lasting five to fifteen years in sectors
where participation is restricted, such
as oil, gas, and telecommunication
ser vi ces. To coor di nat e t he dai l y
operation of a business cooperation
contract, a coordination board can be set
up when necessary, with the presence of
an equal number of nominees from the
parties. A foreign business cooperation
party may set up an executive offce in
Vietnam to act as its representative in
the performance of the contract.
Build-operate-transfer, build-
transfer-operate, and build-transfer
projects
These types of projects are implemented
on the legal basis of a written contract
s i gned by f or ei gn i nves t or s and
an authorized government agency.
The projects are introduced by the
government to attract international
capital into the infrastructure sector
and to help spur development on a
commercially viable basis.
Business scope ranges from traffic,
electricity production and business,
wat er suppl y or dr ai nage, wast e
treatment and other sectors as stipulated
by the prime minister. For both build-
operate-transfer and build-transfer-
operate projects, investors are allowed
to commercially operate within a fxed
peri od t o be abl e t o earn back t he
capital investment. However, build-
operate-transfer projects are handed to
the government after operation, while
for build-transfer-operate projects, the
transfer procedures happen before the
operation starts.
Additionally, for build-transfer projects,
investors will be offered other projects
or opportunities to gain back their
capital investment in build-transfer
projects.
Forms of enterprises
Limited liability company
A l egal ent i t y est abl i shed by i t s
members by way of capital contribution
to the limited liability company. This
type of enterprise can either have one
member or t wo or more members,
although the number of members cannot
exceed 50.
5 Vietnam Briefng | 2010
Understanding Vietnam's legal environment
A member of an LLC is responsible for
debts and other liabilities of the company
within the amount of capital that they
commit to contribute to the company and
is not free to transfer their capital shares.
There is no floor limit in the charter
capital of foreign investors in an LLC.

The management structure of an LLC
consists of the members council, the
chairman of the member s council,
the director or general director, and
controller or board of supervision where
the LLC has more than ten members.
Joint-stock company
A legal entity established by its founding
sharehol ders on t he basi s of t hei r
subscription of companys shares. The
charter capital of a JSC is divided into
shares and each founding shareholder
holds a number of shares corresponding
to their subscribed and paid shares into
the JSC.
A JSC i s requi red t o have at l east
three shareholders which may include
individuals, institutions, locals, or
foreigners with no maximum limit on
shareholders. Shareholders are free to
transfer their shares, except founding
shareholders ordinary shares within the
first three years and voting preference
shares.
There is no floor limit in the charter
capi t al of f or ei gn i nvest or s. The
management structure of a JSC includes
the shareholders general meeting, the
board of management, the chairman
of the board of management, general
director and a board of supervision
wher e t he JSC has mor e t han t en
individual shareholders or if a corporate
shareholder holds more than 50 percent
of the shares.
Partnership
A part nershi p may be est abl i shed
between an individual or a legal entity
and a general partner, who must be
an individual. The general partner has
unlimited liability for the operations of
the partnership. However, in case of JV,
it is very difficult for the Vietnamese
g o v e r n me n t t o c o n t r o l f o r e i g n
individuals or organizations and require
them to take responsibility with their
entire property.
Other forms of foreign
business and investment in
Vietnam
Representative offce
As t he name of t hi s t ype of ent i t y
indicates, a representative offce is only
for representing the parent company,
increasing business opportunity, and
supervising the implementation of the
contracts signed by its parent company
and local party. It is not for local direct
sales because representative offces are
not allowed to issue invoices.
A r epr esent at i ve off i ce does not
constitute an independent legal entity.
Consequently, this type of entity is
exempted from the corporate income tax
and only personal income tax is applied.
A representative offce is suitable for the
initial stage of market penetration since
there is no requirement for registered
capital. In order to obtain permission
for a representative office, the parent
company should legally operate in its
incorporated country for at least one
year. On average the business period
for representative offices is five years,
subject to renewals if necessary.
Commercial branch
A commercial branch is the subsidiary of
a parent company and is not a separate
legal entity according to Vietnam law.
There is a prerequisite requirement
stipulating that the parent company must
operate in its home country for at least
fve years before setting up a branch in
Vietnam. It can carry out commercial
activities although the scope of these
commercial activities are still strictly
limited in Vietnam.
Usual l y a commerci al branch can
execute contracts, earn profit, and
remit it back to the home country as
well as open bank accounts. The issued
license will specify the scope of activity
allowed. Corporate income tax, personal
income tax, and other issues need to be
considered when opening a commercial
branch.
Company names
Vietnam has comparatively strict rules in
place in terms of naming enterprises. For
foreign invested enterprises, the name
may contain words in a foreign language
only if it is the overseas registered name
of that enterprise. No identical company
name can be registered within the same
city or province.
Investment certifcate and
issuing agency
Foreign investors must have a legitimate
project when entering the Vietnam
market. The procedures of obtaining
an investment certificate, also known
as business registration certificate,
can be classified into two categories:
registration or evaluation, depending on
the size and sector of the project.
For non-conditional sectors and non-
special investment projects in which
investment capital is below VND300
billion (about US$16.6 million), only
registration is required.
For an investment project in which
investment capital is VND300 billion
or more, or in conditional sectors, or
which belongs to the category of special
projects, evaluation procedures apply.
Different entities will be required to
submit different documents in order to
apply for a business or an investment.
Under Vietnamese laws, all documents
whi ch ar e gr ant ed by t he f or ei gn
government must be notarized and
legalized. Concurrently, such notarized
and legalized documents are required to
be translated into Vietnamese with the
Vietnamese language version certified
by a competent authority.
For any project outside export processing
zones (EPZs) or industrial zones, the
application documents are required to be
submitted to the provincial department
of planning and investment, and the
investment certifcate will then be issued
6 Vietnam Briefng | 2010
Understanding Vietnam's legal environment
by the provincial peoples committee.
In particular, special projects will be
evaluated and approved by the prime
minister.
For projects inside EPZs and industrial
zones, application documents need
to be submitted to the management
committees, except for special projects
which need to be handed to provincial
department of planning and investment.
The i nvest ment cert i fi cat e for al l
projects inside EPZs and industrial
zones, including special projects, will be
issued by the management committee of
the EPZ or industrial zone.
Registration documentation
The documents needed for registration
will vary depending on the entity of
choice. Generally there are several
documents that every foreign investor
i s requi red t o submi t , such as t he
appl i cat i on f or m f or i nvest ment
certifcate and other documents to prove
fnancial capability.
Representative offces and branches
(non-incorporated entities)
A certified copy of the certificate of
incorporation and any amendments of
the parent company
A cer t i f i ed copy of t he par ent
companys memorandum and articles
of association
A cer t i f i ed copy of t he par ent
companys audit report in its latest
fi nanci al year and i ssued by an
auditing company
A notarized copy of the office lease
contract and a notarized copy of the
chief representatives passport or
branch heads passport
Joint venture enterprises and
wholly foreign-owned enterprises
for LLC and JSC
A certified copy of the certificate of
incorporation and any amendments of
the parent company (if applicable)
A certifed copy of the memorandum
and articles of association of the
parent company (if any)
Technical-economic explanation or
feasibility study (if any)
Share certifcates
Bank statements or any statements
certifying the legal status and fnancial
capacity of investors.
Business cooperation contracts
Business cooperation contract
Technical-economic explanation or
feasibility study
Statements certifying the legal status
and fnancial capacity of investors
Draft technology transfer contract or
technical assistance contract (if there
is any technology transfer or technical
assistance)
Environmental impact assessment
report
Application file for land lease or in
principle agreement on premise lease
(if applicable)
Planning certificate and preliminary
desi gn i ndi cat i ng t he pr oposed
ar chi t ect ur e of t he pr oj ect ( i f
applicable)
Buildoperate transfer projects
Build-operate-transfer contract
Technical-economic explanation or
feasibility study
Statements certifying the legal status
and fnancial capacity of investors
Draft technology transfer contract or
technical assistance contract (if there
is any technology transfer or technical
assistance)
Environmental impact assessment
report
Pl a n n i n g c e r t i f i c a t e a n d t h e
preliminary design indicating the
proposed architecture for the project
Duration of registration and
evaluation
For non-incorporated entities such as
representative offices and branches,
certificates should be issued within
15 working days upon receiving valid
documents.
For incorporated entities, the duration
will depend on whether evaluation is
needed. For those projects that need
registration only, investors should
expect about 15 days bef or e t he
issuance of an investment certificate.
Wher e t he eval uat i on pr ocess i s
needed, duration will vary. Projects
that are not required to be approved
by the prime minister will need 20
to 25 working days before getting an
investment certificate. Projects that do
need the prime ministers approval will
need approximately 37 days to get an
investment certifcate.
Post-registration procedures
After getting an investment certificate,
compani es need t o obt ai n a seal
and a seal-making license from the
Administrative Department for Social
Order (ADSO), under the municipal
police department. The documents
required for application includes an
appl i cat i on form provi ded by t he
ADSO and a notarized copy of business
registration certificate or investment
license.
After obtaining the seal, companies
need to apply for a tax code at the
municipal taxation department and
then open a bank account. A bank-
issued application form, the companys
business registration certificate, the
company charter, the company seal, the
company tax code, and the resolution
of t he management boar d on t he
authorized signatures are all needed for
the application of a bank account.
Ap a r t f r o m t h a t , a n e ws p a p e r
announcement i s needed t o not i fy
the public of the establishment of the
company. The news should include
t he company name; headquart ers
address, branches, or representative
offces; line of business; charter capital;
full name, home address, nationality,
identity card number, passport or other
relevant personal certification, and the
number of the establishment or business
regi st rat i on of company owner or
members; full name, resident address,
nationality, number of identification
card, and passport or other personal
certification of the companys legal
representative; location of business
registration.
7 Vietnam Briefng | 2010
Understanding Vietnam's legal environment
After that, enterprises need to pay for
a business license tax, which costs
anywhere from VND1 million to VND3
million, depending on the registered
char t er capi t al of t he company.
Enterprises will also need to buy pre-
printed VAT invoices from the municipal
taxation department. Companies may
opt to use customized VAT invoices
pending government approval.
Moreover, enterprises need to register
with the local labor offce to declare use
of labor, and register employees with the
Social Insurance Fund for the payment
of social, health, and unemployment
insurance.
Charter capital
Charter capital is the amount of capital
that all shareholders or members of a
company are willing to contribute and
is stated in the company charter. It is
generally equal to the part or stated
value of all outstanding stocks in the
case of a JSC.
Investors cannot increase or decrease
the charter capital amount without
prior approval from the local licensing
authority. Charter capital can be used as
working capital to operate the company.
Charter capital can be 100 percent of
the total investment capital or loan
capital to form the total investment
capital of the company. Loan capital
includes shareholders loans or third-
party fnance.
There are some sectors requiring a
certain amount of legal capital such as
securities, credit institutions, insurance,
and gold production. Legal capital
means the minimum amount of capital
that is required by law for an enterprise
to be established. Charter capital must
be at least equal or higher than legal
capital required for a sector.
Legal capital applicable to securities
companies is as follows:
Securities brokerage: VND25 billion
Securities self-investing: VND100
billion
Underwriting securities issuance:
VND165 billion
Securities investment consultancy:
VND10 billion
The minimum level of legal capital of a
fund management company in Vietnam
shall be VND25 billion.
Regarding insurance companies, the
mi ni mum capi t al requi red for l i fe
insurance companies is VND300 billion,
for non-life insurance ones is VND600
billion and for insurance broker ones is
VND4 billion.
For production of gold jewelry and
fine art objects, enterprises operating
in Hanoi and Ho Chi Minh City must
have a minimum legal capital of VND5
billion; and enterprises operating in
other provinces and cities must have a
minimum legal capital of VND1 billion.
Regardi ng i ngot gol d product i on,
enterprises must have a legal capital of
VND50 billion or more.
For more i nf or mat i on or advi ce
on Vi et nams l egal envi ronment
and how t o set up and carry out
operat i ons as a f orei gn i nvest or,
p l e a s e c o n t a c t De z a n S h i r a &
Associates at vietnam@dezshira.com
or visit www.dezshira.com.
Establishing Business
in Vietnam
Industrial Zones
in Vietnam
Managing Human Resources
in Vietnam
Establishing Representative
Offces in Vietnam
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8 Vietnam Briefng | 2010
Real Estate in Vietnam
[ By Valeria Giacomin, Dezan Shira & Associates ]

F
oreign direct investment in
Vietnam had dramatically
i nc r e a s e d unt i l 2008,
pa r t i c ul a r l y a f t e r t he
country joined the World
Trade Organization in 2007. However,
FDI significantly slowed down due to
the financial crisis. Before 2009, the
share of FDI directed toward real estate
sector was over 45 percent.
This tremendous flow of resources
fuelled the development of business
districts in the three major economic
centers of the country: Hanoi, Ho Chi
Minh City, and Danang, which are
currently going through different stages
of development.
The Real Estate Market
The Hanoi real estate market underwent
robust growth, increasing in demand
and supply through the end of 2007.
After a slight decline in 2008, the
market normalized in 2009. Ho Chi
Minh City has also seen high growth in
recent years. Demand was robust, and
supply kept pace, along with boosted
prices in 2008; and despite the crisis
the market responded well. Real estate
projects in Danang are just in a start-
up phase but the market is expected to
become more and more attractive in the
future.
Bet ween t he end of 2009 and t he
middle of 2010, signals of recovery
were visible. Foreign investors returned
to either to resume projects which had
been postponed during global economic
recession, or even start new ones.
Up to the second quarter of the year, 11
new office buildings began operation
in Ho Chi Minh City and 137 foreign
direct investment projects worth a total
of US$817 million were licensed.
In Hanoi, nine more office buildings
entered the market; in particular Grade A
Sentinel Place located in Hoan Kiem
District saw very good performance,
with rental rates deemed stable in
the central business district. Greater
competitive pressure on rent is expected
in the west area, where the rest of the
new buildings are concentrated.
According to Savills, the combined
Vietnamese office market currently
includes 242 office buildings of all
grades with a total leasable area of
around 1.6 million square meters.
Projections for next three years are
favorable: Ho Chi Minh City is expected
to receive about 20 office buildings
with a total of 153,000 square meters by
the end of the year. In addition, heavy
investment in infrastructure together
with increasing population in District 7
(Phu My Hung Area) are l i kel y t o
impact on offce demand, which in turn
will trigger total future supply for an
increasing 20 percent.
In Hanoi, the oversupply of offce space
is anticipated to signifcantly affect the
market in the next few years when about
130 projects are expected to be licensed
before 2014, thus increasing the current
supply of 1.8 million square meters. In
fact most of the available resources will
be concentrated in high-grade office
buildings planned in the area west of
the city. Therefore, rising competition
bet ween t he west and t he cent r al
business district and other surrounding
districts is likely to reduce the average
rate of offce-space rents.
The 70 story Hanoi Landmark Tower,
the tallest offce tower in the country, is
set to open in My Dinh area, Cau Giay
district. It will also have two other 48
story towers. The complex will include
a hotel and apartments. The 65 story
Hanoi City Complex, located in Ba
Dinh, will be the second tallest building
complete with shopping centers, hotels,
apartments and other services.
Renting Offces in Vietnam
Due to Vietnams economic growth,
mor e f or ei gn compani es ar e now
looking at the market and considering
opening representative offices and
headquarters there.
The Vietnamese real estate market is
complex. Unique supply and demand
forces, together with restrictive, unclear
and sometimes unreliable legislation,
make it unlike any other market in the
world. Due to this complexity, obtaining
advice from specialized real estate
services and consulting companies is
recommended.
A number of well-known real estate
consul t i ng compani es have been
operating in the country for several
years now and have developed expertise
in the industry.
Choosing a real estate company
operating in the country
Currently the main players offering
business-related property services are
Savills, CBRE, Cushman and Wakefeld,
Norfolk Development Group, and the
Landmark Club. Knight Frank also
entered the market this year.
City Grade Number of
buildings
Approx.
Supply (sqm)
Occupancy
(%)
Average rent
(US$/sqm/month)
Ho Chi Minh
City
Grade A 6 100 89 59
Grade B 35 476 91 33
Grade C 106 376 84 22
Hanoi Grade A 16 140 82 49
Grade B 36 313 85 27
Grade C 43 185 91 18
Source: Savills Vietnam
9 Vietnam Briefng | 2010
Real Estate in Vietnam
Al l of t hem pr ovi de a number of
services such as consulting, property
and faci l i t i es management , space
planning, leasing, valuation and sales,
corporate real estate services in all the
key segments of commercial, industrial,
ret ai l , resi dent i al and i nvest ment
property. They are normally based in
Hanoi and Ho Chi Minh City, the top
business centers of the country.
Submitting your request with
specifc details
Real estate consultants need to be
provided with details concerning the
size of office place needed and the
preferred geographical location. Most
foreign investors choose to target either
Hanoi in the north or Ho Chi Minh City
in the south, depending on the nature
and scope of their business.
Recently, Danang, located in central
Vietnam, has become an interesting
l oc a t i on bot h f or e nt e r i ng a nd
expanding in the market. According to
specifc requests in terms of size, lease
term, timing, location, workstation slots
and offce facilities they will customize
different options.
Despite the possibility to lease an offce
or even purchase it, most companies
looking to open their frst representative
headquarters are commonly advised
to outsource the office management
through business centers.
Direct ownership is rarely selected
as a first-entrance strategy, but rather
companies choose it after gaining a
deeper knowledge of the market and
establishing in a long-term perspective.
Business centers are usually located in
major business areas and offer ready-
to-use serviced and virtual offices,
allowing foreign investors to quickly
move inside the office and start their
businesses effciently.
The i ncreasi ng number of faci l i t y
management providers indicates the
success of the business center format.
The following are just some of the
players established in Vietnam: Regus,
Prime, Level One, G-office, Signature
Space and Fimexco Construction. Some
of these companies are directly invested
in the construction of office buildings,
while other companies purchase or lease
offces for long periods.
Evaluating the different customized
options and spot the one that best
fts your specifc needs
Once the request has been submitted,
it is likely to receive several proposals.
The price depends on location, size of
the office, grade of the building, and
lease term. Usually, a company will
choose a location in the city district, and
the more central the location, the higher
the price per square meter. In Hanoi,
most foreign companies are based in
the central business district of Hoan
Kiem, in Ho Chi Minh City in District 1,
which maintains its top ranking in the
market share.
Offce buildings can be divided in three
grade categories: A, B and C according
to the quality of their facilities and the
average rent price. Class A buildings
are considered prestigious buildings
with above average rents. Class B are
those that target a wide range of users
and are adequate in their features with
rental prices considered average for
the area, while Class C buildings are
functional buildings with rents below
average prices of that area. Normally,
monthly rent ranges and varies based
on specifc offce space features. Below
is an overview of the average prices in
Hanoi and Ho Chi Minh City for the
second quarter of 2010 according to
Savills.
It is strongly recommended that all
prospective tenants ask what is exactly
included in the quoted rent in detail.
Some buildings quote the net price,
and some the gross price both for offce
space rent and the serviced offce fee. It
is also possible that measurements can
vary from one building to the next.
Negotiating the terms of the
contract
Once the office proposal meets the
investors needs, terms of the contract
and rent price can be discussed. In the
case of renting conventional office
space, this phase will require around
three months, and resources because
details concerning office maintenance
will have to be set up and negotiated.
Procedures for direct ownership will be
equally time consuming but the investor
coul d rel y on real est at e company
assi st ance and expert i se wi t h t he
countrys legal practices. For companies
opt i ng t o obt ai n t he servi ces of a
business center, they must negotiate the
annual price for the full-serviced offce
together with the monthly rent.
While the latter depends on the specifc
characteristics of the space, the former
slightly changes when it comes to
office-management partner flexibility,
payment terms and package features.
Discounts and ideal terms are typically
offered to companies already involved
in serviced offices in other countries,
in which the business center provider
operates for more than one year.
Normally, two months worth of rental
fees is required as deposit and will be
returned at the end of the lease period.
All the rental charges must be paid
in advance at the beginning of rental
period. Finally, normal fees are always
presented excluding 10 percent value-
added tax.
Buying Real Estate in
Vietnam
In 2009, the Vietnamese government
began allowing foreign nationals to
purchase real estate in the country.
Under current regulations, foreign
residents are able to buy and hold real
estate for up to 50 years, giving them
the ability to legally buy, inherit or own
a house as well as be the recipient of a
donated house.
The following documents are needed
when buying property in Vietnam as a
foreigner:
Passpor t or a paper of passpor t
substitute validity granted by an
authorized agency
Investment certificate granted by
a compet ent Vi et namese agency
showing that the applicant has entered
a direct investment in Vietnam that is
valid for at least one year, or possess
a paper proving that the applicant is
a member of the board of directors or
management board of an enterprise
operating in Vietnam
10 Vietnam Briefng | 2010
Real Estate in Vietnam
Outsourcing the managing of the office
allows foreign investors to save money and
time when entering a new market. Most of
business centers are located in prestigious
addresses and offer packages of services
t hat vary i n pri ce dependi ng on t he
facilities.
Office management companies normally
shape their offer based on three concepts:
full-serviced office, virtual office and
meeting room.
Full-serviced offce space
This solution allows the user to combine
t radi t i onal space ut i l i zat i on i nsi de a
business center with the whole range of
services. In addition to the office space
lease, companies will just have to pay a
fixed monthly contribution for the fully
integrated services. The average monthly
price for a 12-month contract will depend
on the cost of space per square meter and
the additional cost for the services provided
by the business center.
US$100 US$200 plus a set-up fee of
about US$65 per workstation.
*
Virtual offce
This represents a combination of off-site
live communication and address services
that allow users to reduce traditional
office costs while maintaining business
professionalism. Virtual office could be
the very first step toward establishing a
representative offce because the features of
the contract include a number of services
such as call answering at company name,
or free usage of publ i c areas and IT
infrastructures.
The average monthly price for a 12-month
contract is US$59-US$240 plus a setup fee
of about US$70.
*
Meeting room
The feature and the cost of this service can
vary depending on layout settings, location
and purpose. The service often includes
audio and video equipment, secretarial and
IT support, and a catering service, and it
is cheaper than the price of a hotel of the
same grade.
The average daily price for meeting rooms
can range from US$35-US$200.
*
* all charges are excluding 10 percent
value added tax
CONVENTIONAL OFFICE SPACE SERVICED OFFICE SPACE
Organize offce fxtures No capital outlay
Buy offce furniture Ready-to-use fully furnished offce
Arrange IT installation State-of-the art equipment and IT infrastructure
Find receptionist Professional receptionist teams
Offce maintenance, repair, utilities, clearing
expenses
Maintenance, utilities, cleaning, free usage of
refreshment area
Building insurance Free usage of meeting room
Pay all monthly bills No extras, no hassle
Fixed contract and lease terms Flexible lease terms starting from 1 month
Timing to move in is about three months Sign the contract and immediately move in
The BUSINESS CENTER ADVANTAGE
Applicants hiring contract from
an company operating in Vietnam
showing the position of director
general, director, deputy director
general, deputy director, or deputy
head of a uni t at t ached t o t he
enterprise
For specifc foreigners who have been
recognized for their contributions
to Vietnam; they must possess an
order, written certification or medal
conferred by the President of the
Socialist Republic of Vietnam
Diplomas for applicants entering
the country to conduct economic,
s c i e nt i f i c a nd t e c hnol ogi c a l ,
environmental, education and training,
culture and information, physical
training and sports, health care, social
or legal activities as proof of their
qualifcations,; it must also come with
either one of the following papers:
Vietnamese work permit and permit
for professional practice in Vietnam
Foreigners with special skills must
possess paper s cer t i f yi ng t hei r
professional qualifications and skills
issued by a Vietnamese agency and
enclosed with permits for approved
professional practice in the country
Foreigners married to Vietnamese
ci t i zens must possess mar r i age
certificates from local or foreign
authorities along with the Vietnamese
passports or permanent residence
books and identity cards of their
Vietnamese spouses
Foreign buyers must be permanent or
temporary residence cardholders for at
least 12 months to be able to buy and
own houses. Applicants must also pres-
ent a dossier with the following:
An a ppl i c a t i on f or t he hous e
ownership and residential land use
right certifcate written in Vietnamese
and English
The original house sale or donation
cont r act or hous e i nher i t ance
document following Vietnamese law;
in cases where the apartment was
purchased from a real estate company,
the house purchase and sale contract
is not required to be notarized; if
purchasing or accepting a house
donation from an individual, contracts
must be notarized
A certified true copy of the foreign
passpor t and any of t he paper s
specifed above; educational diplomas
proving professional qualifications
or marriage certificate granted by a
foreign country must be translated
into Vietnamese and notarized
For cases wherei n t he appl i cant
purchases an apartment from a real
estate business company, purchase/
sale procedures must be carried out
via a real estate trading foor, and the
original certification of the purchase
and sale of that apartment via the
trading floor under the law on real
estate business is required
Tax and registration fee receipts;
locals and foreigners are charged the
same tax and registration fee rates
Many foreigners prefer leasing frst to
making an outright purchase. This opens
the door for foreign investors who want
to settle down in Vietnam and also pro-
vides a great potential demand for real
estate in the future in Vietnam.
For more information on buying or
renting real estate in Vietnam, please
contact Dezan Shira & Associates
at vietnam@dezshira.com or visit
www.dezshira.com.
11 Vietnam Briefng | 2010
New Arbitration Law Improves
Dispute Resolution in Vietnam
[ By Joyce Roque, Vietnam Briefng ]
A
s an i ndi cat i on t hat
Vi et nam i s wor ki ng
t owar ds maki ng i t s
regulatory environment
m o r e a l i g n e d t o
international standards, a new version
of its arbitration law was released this
June, effective January 1, 2011.
Referred to as Law 54, it retains some
provisions from the previous 2003
ordinance while adding significant
changes. The revisions to the law will
help assure foreign investors coming
into the country, giving them more
avenues for resolving commercial
disputes with local companies.
The scope of the arbitration law has
been expanded to include disputes
between parties arising from commercial
activities and includes other disputes
between parties which the law stipulates
shall be resolved through arbitration.
Consumers will also be given more
rights under Law 54, allowing them
to bring a case to court or resort to
arbitration to settle a dispute.
Part i es i n di sput e can choose t he
appointment of a third arbitrator or
chairman in the instance that they
cannot reach an agreement, which
is similar to international standards.
Law 54 also gives arbitration tribunals
the ability to enforce interim relief if
requested by any of the parties involved.
Interim relief includes the following:
Prohibition of any change in the status
quo of the assets in dispute
Prohibition of acts or ordering some
specific action to be taken, aimed at
preventing conduct adverse to the
arbitration process of the arbitration
proceedings
Attachment of the assets in dispute
Requirement of preservation, storage,
sale or disposal of any of the assets of
one or all parties in dispute
Requirement of interim payment of
money as between the parties
Prohibition of transfer of asset rights
of the assets in dispute
A party that is considering interim
relief must submit an application with
authorities that contains the following
information:
Date on which the application is
drawn
Name and address of the applicant for
the interim relief
Name and address of the party against
whom the interim relief is sought
Summary of the items in dispute
Reason necessitating grant of interim
relief
Specifc items of interim relief sought
The party applying for interim relief
will be considered responsible for any
financial losses that could occur in
the instance that the interim relief is
unnecessary.
When the law is implemented next year,
authorities will allow qualifed and duly
appointed foreign nationals to act as
arbitrators even if the disputes involve
local companies. Vietnam will open the
country to foreign arbitration institutions
either as a branch or a representative
offce.
A branch is defined by Law 54 as a
dependent unit of a foreign arbitration
institution operating in the country. It
must appoint an arbitrator to work as
the formal legal representative of the
office. A representative office is also
considered a dependent unit of a foreign
arbitration institution that is allowed to
promote arbitration services.
A representative office of a foreign
arbitration institution is allowed to do
the following:
Seek and promote opportunities for
arbitration activities in Vietnam
Rent an office and hire or purchase
facilities and materials necessary for
the activities of the representative
offce.
Recrui t Vi et namese and forei gn
e mp l o y e e s t o w o r k a t t h e
representative offce
Open Vietnamese dong and foreign
currency accounts at an authorized
bank for the exclusive use of only the
representative offce
Have a seal made bearing the name of
the representative offce in accordance
with the law of Vietnam
To oper at e f ol l owi ng t he scope
and dur at i on s t i pul at ed i n t he
representative offces license
To only conduct promotions and
advertising for arbitration activities in
accordance with the law
Compl y wi t h t he r el evant l aw
o f Vi e t n a m o n o p e r a t i o n o f
representative offces
Pr ovi de annual r epor t s on t he
operation of the representative offce
to the local Department of Justice
Arbitration centers will be given until
the end of 2011 to comply with the
new provisions. Failure to do so risks
authorities revoking the arbitration
centers operation license. Arbitration
settlements made prior to January 1,
2011 will still be valid following the
laws in place when the dispute was
resolved.
For additional advice or information
on arbi t rat i on i n Vi et nam, pl ease
e-mail vietnam@dezshira.com or visit
www.dezshira.com.
Hanoi
hanoi@dezshira.com
Tel +84 4 3942 0443
Room 901, Floor 9th, VID Tower 1 Building
115 Tran Hung Dao Street
Hoan Kiem District
Hanoi
Ho Chi Minh City
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Fax +84 8 6299 8295
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