According to the 2020 Investment Law in Vietnam, foreign investors can choose various forms of investment as long as they meet the market access criteria defined by the law. These forms include
Establishing An Economic Organization
Definition:
- This is a direct investment form by foreign investors to establish a new enterprise in Vietnam. The economic organization can be a Limited Liability Company (LLC) or a Joint Stock Company (JSC) – a common investment form for many foreign investors in Vietnam.
- Foreign investors must apply for an Investment Registration Certificate and a Business Registration Certificate to establish an economic organization in Vietnam.
- Must comply with legal regulations regarding conditions and restrictions applicable to certain investment sectors in Vietnam, such as minimum capital, licensed investment sectors, and the foreign ownership ratio depending on the field.
Hyosung Vietnam Co., Ltd., a subsidiary of Hyosung Corporation from South Korea, serves as a prime example of this investment model. Hyosung invested $1.2 billion USD to build a state-of-the-art fiber and chemical production plant located in the Nhon Trach Industrial Zone, Đong Nai Province.
Rather than acquiring an existing company, Hyosung opted to establish a brand-new company from scratch — a move that granted them full ownership and operational control. To bring this massive project to life, they successfully secured both:
- The Investment Registration Certificate (IRC), legitimizing the large-scale project under Vietnamese investment law.
- The Enterprise Registration Certificate (ERC), officially registering Hyosung Vietnam as a legal entity ready for operations.
By following this approach, Hyosung ensured full compliance with Vietnam’s legal framework while benefiting from the country’s competitive labor costs, strategic location, and strong industrial infrastructure.
Capital Contribution, Share Purchase, And Capital Contribution
Definition:
- Foreign investors can participate in capital contribution, share purchase, or capital contribution in existing enterprises in Vietnam, instead of establishing a new economic organization. This is an investment form in already established companies or companies needing capital for expansion or development.
- Foreign investors must register capital contribution, share purchase, or capital contribution with the competent state authority.
- The foreign ownership ratio is limited according to each industry, sector (to protect the interests of the State, protect the environment, national security, and specific regulations of each industry).
Retail Industry: Central Group (Thailand) acquired 49% of shares of Nguyen Kim Company, one of the leading electronics retailers in Vietnam; Masan Group acquired VinComerce and VinEco (under Vingroup) in the scale of consumer goods – retail
Food and Beverage Industry: Jardine Cycle & Carriage Group (Singapore) acquired 10% of shares of Vietnam Dairy Products Joint Stock Company (Vinamilk)
Implementing Investment Projects
Includes:
- Projects not subject to the investment policy approval must apply for an Investment Policy Approval Certificate (“IPAC”) and select an investor.
- Projects subject to IPAC and investor selection.
Definition:
- These projects may relate to sectors such as infrastructure, real estate, industrial production, or energy.
- Investors must apply for an investment certificate for each project and provide complete legal documents, including a business plan, environmental impact assessment, and related documents.
- At the same time, investors must meet the requirements for selecting investors through bidding or auction (if any).
Example:
New Urban Area Development Project: A real estate company proposes a project to build a new urban area with a land area of less than 300 hectares and a population of fewer than 50,000 people. This project falls under the investment approval authority of the Provincial People’s Committee.
Golf Course Construction and Business Project: A foreign investor plans to implement a golf course construction project in Vietnam. This project requires investment approval from the Provincial People’s Committee and must comply with regulations on land use and environmental protection.
Investment In The Form Of Business Cooperation Contracts (BCC)
Definition:
- A Business Cooperation Contract (BCC) is a contract signed between investors to cooperate in business, share profits, and distribute products according to legal regulations without establishing an economic organization. During the implementation of the BCC, the participating parties can agree to use assets formed from business cooperation to establish an enterprise according to legal regulations on enterprises.
- The BCC does not require the establishment of a new enterprise but must be registered with the competent state authority.
- BCC contracts are signed between domestic investors and foreign investors or between foreign investors who carry out procedures for granting Investment Registration Certificates according to regulations.
- The participating parties must sign the contract and comply with the conditions in the contract regarding profit sharing, costs, rights, and obligations of the parties.
Conclusion:
- Establishing an economic organization is suitable for investors who want to have complete control over the enterprise and deeply engage in the Vietnamese economy, but it requires large capital and complex legal procedures.
- Capital contribution, share purchase, and capital contribution are flexible options that allow investors to access existing companies, but caution is needed with business partners.
- Implementing investment projects is suitable for large projects, offering high profit opportunities, but may encounter risks due to legal and environmental factors.
- Investment through BCC is a short-term, simple cooperation form but requires trust and close coordination among participating parties.
References:
- 2020 Investment Law
- Decree 31/2021/ND-CP detailing and guiding the implementation of certain provisions of the Investment Law
- 2020 Enterprise Law
- Decree 01/2021/ND-CP on business registration
