US embassy cable - 04HANOI2068

UNCLAS SECTION 01 OF 03 HANOI 002068 
 
SIPDIS 
 
UNCLASSIFIED 
 
SIPDIS 
 
STATE FOR EAP/BCLTV 
STATE FOR EB/IFD/OIA 
DEPT PASS TO USTR 
 
E.O. 12958:  N/A 
TAGS: EINV, EFIN, ELAB, KTDB, PGOV, OPIC, VN, FINREF, IPROP, LABOR 
SUBJECT: VIETNAM: INVESTMENT CLIMATE STATEMENT APPENDIX 
2004 
 
REF: STATE 141379 
 
1.  This cable provides the suggested text of the 2004 
Investment Climate Statement Appendix for Vietnam. As 
requested reftel, post has also sent the ICS/A via email to 
EB/IFD/OIA Alexander T. Bryan. 
 
2.Begin text of the 2004 Investment Climate Statement 
Appendix for Vietnam: 
 
Vietnam - July 2004 Appendix to 2003 Investment Climate 
Statement 
 
This appendix serves as an update to the 2003 Investment 
Climate Statement for Vietnam. It has been provided to 
assist investors in the interim period resulting from the 
U.S. Government's decision to begin publishing the Country 
Commercial Guide (of which the Investment Climate Statement 
is a chapter) on a calendar year basis, in January instead 
of August. 
 
The United States Government has reviewed the 2003 
Investment Climate Statement for Vietnam, and has noted the 
following changes that have occurred since its publication. 
In most circumstances, if a portion of the 2003 Investment 
Climate Statement has not been modified in this appendix, 
it is because the U.S. Government is satisfied that it 
continues to accurately reflect the state of affairs in 
Vietnam as of July 2004. 
 
----------------------- 
Openness to Foreign Investment: 
----------------------- 
 
In an effort to unify the laws governing foreign and 
domestic investment, the Government issued Decree 38 in 
April 2003 providing for the conversion of a number of 
foreign invested enterprises (FIEs) into foreign invested 
shareholding companies (FISCs). The conversion option is 
only available to joint ventures (JVs) and FIEs. A FISC 
must continue to implement the approved investment project 
of the former FIE and will be entitled to preferential 
treatment under the Law on Foreign Investment and its 
implementing regulations. Nevertheless, the rights of 
FISCs' shareholders and the organizational structure of the 
FISCs will be governed by the Law on Enterprises, the same 
as for domestic shareholding companies. A FISC must have at 
least one foreign founding shareholder and the total 
shareholding of the foreign founding shareholder(s) must be 
at least thirty percent of the FISC's chartered capital 
throughout the life of the company. FISCs will be permitted 
to list on the Vietnam stock exchange. 
 
Only a limited number of FIEs were selected by the Ministry 
of Planning and Investment (MPI), in consultation with 
other ministries, for conversion into FISCs. To qualify for 
conversion, a FIE must have been in operation for at least 
three years, it must have made profits in the year 
immediately preceding the year of conversion, and its legal 
capital must be fully paid. All conversions are subject to 
the Prime Minister's approval. 
 
As part of the tax reforms and as a financial incentive to 
foreign investors, the Ministry of Finance issued Circular 
26 in March 2004 abolishing profit remittance tax for 
foreign invested enterprises. 
 
 
----------------------- 
Conversion and Transfer Policy: 
----------------------- 
No significant changes since 2003. 
 
 
------------------------ 
Expropriation and Compensation: 
------------------------ 
No significant changes since 2003. 
 
 
-------------- 
Dispute Settlement: 
-------------- 
No significant changes since 2003. 
 
 
------------------------------- 
Performance Requirements and Incentives: 
------------------------------- 
No significant changes since 2003. 
 
--------------------------------- 
Right to Private Ownership and Establishment: 
--------------------------------- 
No significant changes since 2003. 
 
 
--------------------- 
Protection of Property Rights: 
--------------------- 
The GVN reversed its decision to move responsibility for 
trademark registration from the National Office of 
Industrial Property (NOIP) to the Ministry of Trade in 
Decree No. 28/2004/NC-CP dated January 16, 2004. 
 
 
---------------------------- 
Transparency of the Regulatory System: 
---------------------------- 
In 2002 the GVN amended the Law on the Promulgation of 
Legal Normative Documents to require that all legal 
documents and agreements to international conventions be 
published in the Official Gazette.  As of July 2003, the 
Official Gazette has been published on a daily basis. 
 
 
------------------------------------- 
Efficient Capital Markets and Portfolio Investment: 
------------------------------------- 
As part of its stated efforts to encourage foreign 
investment and to promote the development of the relatively 
new stock market, the Government issued Decision 146 in 
July 2003 abolishing the equity limit of a single foreign 
organization or a single foreign individual in a listed 
Vietnamese company. 
 
 
------------- 
Political Violence: 
------------- 
Large demonstrations by ethnic minorities in the Central 
Highlands occurred again in 2004. 
 
 
----------- 
Corruption: 
----------- 
No significant changes since 2003. 
 
 
------------------------ 
Bilateral Investment Agreements: 
------------------------ 
Vietnam concluded 2 bilateral investment agreements with 
Japan and Namibia. 
 
 
----------------------------------- 
OPIC and Other Investment Insurance Programs: 
----------------------------------- 
No significant changes since 2003. 
 
 
------ 
Labor: 
------ 
No significant changes since 2003, except the number of 
strikes rose from 79 cases in 2002 to 119 cases in 2003. 
 
 
----------------------- 
Foreign Trade Zones/Free Ports: 
----------------------- 
No significant changes since 2003. 
 
------------------------------------ 
Foreign Direct Investment Statistics: 
------------------------------------ 
Statistics will be updated in the next full revision of the 
Investment Climate Statement, which will be published in 
January 2005. 
End text of Investment Climate Statement Appendix for 
Vietnam. 
BURGHARDT