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FIEs, who are you?
Foreign-invested enterprises (FIEs) and domestic enterprises have different rights and obligations. However, Vietnamese laws do not clearly stipulate which enterprises are considered FIEs, thus muddling the implementation of laws.
Under the unified investment law, FIEs include enterprises established by foreign investors to make investment activities in Vietnam; and enterprises of which foreign investors buy stakes or merge into others.
As such, can it be understood that an enterprise in which foreign investors hold just 1% of stakes is referred to as an FIE? There has been no clear answer to the question.
Meanwhile, when stipulating the procedures for setting up businesses, the government’s Decree 139 differentiates between the ownership ratios in enterprises. For example, if enterprises to be established have the foreign ownership ratio of over 49%, the enterprises will follow the procedures applied for 100% foreign-owned projects. As for projects with less than 49% foreign ownership ratio, the enterprises complete business registration like domestic enterprises.
As such, can it be understood that enterprises with more than 49% foreign ownership ratio are FIEs, while enterprises with less than 49% are domestic enterprises? Still no answer.
Also under the investment law, enterprises in which domestic capital account for more than 51% of chartered capital can enjoy investment conditions like domestic enterprises. However, the provision has been translated differently by local authorities.
For example, the Ministry of Industry and Trade (MOIT) thinks that enterprises must be considered FIEs even if they have only 1% foreign ownership ratio, and they must bear limitations in market access.
If the MOIT’s way of understanding prevailed, a lot of public companies, after selling stakes to foreign investors, would have to re-register for some kinds of business (in the distribution sector, for example, enterprises would have to ask for permission to set up more than one retail point).
In some localities, lawyers say, though it is stipulated that enterprises with less than 49% foreign-owned capital follow procedures for domestic businesses, a lot of enterprises of this type have still been asked to follow the procedures applied to 100% foreign-owned enterprises.
Nguyen Dinh Cung, Head of the Macroeconmic Management Department under the Central Institute of Economic Management CIEM, said that in some localities, projects with just US$1 worth of foreign capital are considered foreign-owned projects, and have to follow the procedures applied to 100% foreign-owned projects.
The unclear provisions of the laws have been hindering the clear implementation of the laws, lawyers say, adding that this has put difficulties on domestic enterprises as the enterprises cannot receive foreign capital.
VNN
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