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| Foreign eyes to now enjoy 20/20 vision |
| 30-JUN-2009 Intellasia | Vietnam Investment Review page 16 |
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| 30 Jun, 2009 - 7:00:00 AM |
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Foreign investors will no longer suffer confusion over capital contributions and share purchases in Vietnamese enterprises.
On June 18, 2009, the prime minister enacted Decision 88/2009/QD- TTg to replace the earlier regulations on foreign capital contributions and shares purchase of foreign investors in Vietnamese enterprises under Decision 36/2003/QD-ITg dated March 11, 2003.
According to Phung Anh Tuan, managing partner of HCM City-based VCI Legal, the fact that Decision 36 continued to exist after the new Business Law (2005) and Vietnam's World Trade Organisation
(WTO) commitments came into force have created confusion for foreign investors and local authorities in registering foreign shareholders in domestic enterprises due to, inter alia, the cap of 30 percent of foreign holding in a local company.
"While it is not entirely clear why the new decision was delayed for so long regardless the market poor performance in 2008 and earlier 2009, Decision 88 finally arrives as a belated good news for foreign investors in Vietnam," Tuan said.
Dinh Nhat Quang, senior associate of Hanoi-based Leadco Vietnam Legal Counsellors, said Decision 36 which limited the maximum 30 percent ownership of foreign investors in Vietnamese enterprises, hindered activities of capital contribution and purchase of shares by foreign investors in Vietnamese firms.
It also conflicted with Decision 13912007/ND-CP which stipulated that legal entities including foreign-owned companies and individuals not limited to nationalities and resident place, all are allowed to contribute capital and purchase of shares without limitation in Vietnamese enterprises, excluding some specific cases governed by specific legal regulations.
"This launch of Decision 88 [therefore] ended existence of Decision 36 and cleared up the hindrances," Quang said.
Local lawyers, however, agreed that Decision 88 was just a confirmation of changes stipulated at recent laws and decrees, especially after Vietnam joined the WTO, with no extension in the areas and industries that foreign investors could buy in.
Decision 88 regulates that foreign investors can obtain shares in local enterprises without limitation or 100 percent, except the cases of enterprises of limited and conditional industries defined under local regulations and Vietnam's WTO commitments. They include public companies' shares; trading companies' capital; multi-business-companies' shares with various percentages; ratios of shares subscription for special industries regulated by the particular laws in line with WTO commitments; and state-owned enterprises' when their equitisation ratios comply with the approval of equitisation plans.
"In particular, Decision 88 does not change the current foreign share limit set by Decree 139 and other senior regulations [the current universal cap of maximum 49 percent as well as other foreign share caps in limited/conditional industries] in line with the limited list of the WTO commitments," Tuan said.
The Vietnamese lawyers meanwhile agreed that the limitations could be viewed as a safety valve of country macro policy.
"The limitation [in foreign ownership in Vietnamese trading companies] is necessary to protect domestic Vietnamese enterprises as long as the government fulfils its obligations following WTO commitments," Quang said.
Tuan noted that what more important was that history had shown such limitation normally did not pose an insurmountable barrier. "Provided a business is very lucrative to invest, most foreign investors will forge ahead regardless of such a limitation. We are anticipating, anyway, that the government will either remove or lift this limitation [49 percent] in certain sectors after the current global economic crisis," he said.
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