The Law on Foreign Investment in Vietnam officially came into effect on 1st January 1998. Since then to the end of 2004, foreign investment into Vietnam underwent a period of 17 years and enjoyed great results, creating an important locomotive for Vietnam’s incessant socio-economic development.

The Law on Foreign Investment in Vietnam was amended several times, i.e. in June 1992, November 1996, June 2000 and 2003. In addition, the Government, ministries and local authorities have issued guidelines and mechanisms related to attracting foreign investment. All these actions are aimed at building an attractive, transparent and effective investment environment, creating all the best conditions for foreign investors to do long-term business in Vietnam.

According to statistics, in Vietnam, over 5,000 projects are still in effect with a total capital of $45.5 billions. 50 % of these projects are under operation with the total realized capital of $26 billions. The foreign investment sector ranked first in import-export volume of Vietnam. Specifically, export reached $8.6 billions, increasing 35.6% against last year; import of $10.97 billions increased 24.4% while the total turnover of the sector was $18 billions, increasing 20%. The foreign investment sector contributes to the country about 15% GDP of Vietnam and approximately 17% development fund. Foreign investment projects created 739,000 jobs, not to mention those that generate indirect income for tens of thousands of workers.

In 2004, the overall foreign investment capital in Vietnam was the highest in recent years, reaching over $4 billions with an increase of $900 millions as against 2003. Up to date, according to the Foreign Investment Department, the realized capital reached $2.85 billions, increasing 7.5% against 2003 and surpassing theexpected target of 2.75 billions. Foreign investment capital for industry always enjoys high percentage (67% of all the projects).

In 2004, there were new features in foreign investment in Vietnam. For the first time, the Government advocated equitization of foreign invested enterprises and took into consideration a unified Enterprise Law and a common Investment Law so as to create a fair play-ground for the business community as well as domestic and foreign investors. The Government enables stronger decentralization by allowing Hanoi and Ho Chi Minh city to grant licences to foreign invested projects with a capital of $40 millions instead of $10 millions as it was previously stipulated. Other cities and provinces will be allowed to grant licences for projects with a capital of $20 millions instead of $5 millions as it was previously stipulated (except for projects in group A).

So far, 60 localities in the country have granted investment licences according to the criteria for local decentralization, Ho Chi Minh city has the biggest number of such projects of about 1,200 projects with registered capital of $2.2 millions. The southeastern region has 1,200 of such projects with registered capital of $1.9 millions.

10 top localities in attracting foreign capital in 2004:

(Millions dollars)

No. Locality Number of projects Registered capital Realized capital

1 Dong Nai 94 497.87 225.9

2 Ho Chi Minh city

208 353.10 163.63

3 Binh Duong 130 306.99 114.36

4 Thai Nguyen 3 147.65 44.48

5 Hanoi 68 130.38 51.62

6 Hai Phong 16 84.65 52.43

7 Quang Ninh 12 82.53 42.25

8 Vinh Phuc 20 73.95 37.27

9 Binh Thuan 4 59.50 18.25

10 Tay Ninh 11 57.51 40.00

10 top countries and territories in foreign investment to Vietnam in 2004: (Millions dollars)

No. Country, region Number of projects Registered capital Realized capital

1 Taiwan 156 453.45 181.21

2 South Korea 159 339.70 182.08

3 Japan 61 224.35 117.01

4 Hong Kong 38 198.12 86.02

5 British Virgin Islands 25 176.69 82.57

6 Canada 12 154.96 46.77

7 Singapore 47 123.88 66.71

8 Malaysia 26 83.80 43.50

9 China 67 78.87 48.88

10 The United States of America 30 74.94 41.67

10 top localities in attracting foreign investment capital (as of 12th December 2004): (Millions dollars)

No. Locality Number of projects Registered capital Realized capital

1 Ho Chi Minh city 1,590 11, 517.83 6,077.65

2 Hanoi 549 8,019.45 3,702.27

3 Dong Nai 608 7,528.41 3,702.27

4 Binh Duong 902 4,241.04 1,766.84

5 Ba Ria-Vung Tau 108 2,132.39 1,397.93

6 Hai Phong 164 1,790.72 1,252.20

7 Lam Dong 67 881.98 131.70

8 Thanh Hoa 15 696.69 411.09

9 Long An 85 626.18 306.38

10 Vinh Phuc 73 593.47 442.94

11 leading countries and regions in foreign investment into Vietnam (as of 12th December 2004): (Millions dollars)

No. Country, region Number of projects Registered capital Realized capital

1 Singapore 334 7,982.94 3,381.14

2 Taiwan 1,259 7,258.37 3,145.84

3 Japan 490 5,386.89 4,253.31

4 South Korea 840 4,751.74 2,888.83

5 Hong Kong 326 3,228.23 1,941.83

6 British Virgin Islands 212 2,430.42 1,141.28

7 France 142 2,153.11 1,060.72

8 The Netherlands 53 1,835.26 1,974.73

9 Thailand 116 1,384.85 756.77

10 Malaysia 163 1,319.00 811.44

11 The United States of America 215 1,281.28 729.93

Shortcomings:

However, at present, there exist three outstanding issues . First, foreign investors claim that the country's law system is unstable and unpredictable with a number of inappropriate regulations such as limitting foreign labors below 3% and setting ceiling price for technological transfer. Second, the country's infrastructure is still poor, the supply of water and electricity in some localities is insufficient, creating difficulties for production and business, cost for transportation and storage is high. Third, bureaucratic procedures remain bulky, project application and appraisal process is time consuming and scope of projects eligible for licence is limited.

Foreign investment forecast in 2005: According to Mr. Vu Anh Tuan, Deputy Director of the Department of Foreign Investment , the Ministry of Planing and Investment, foreign investment in Vietnam in 2005 will continue to grow at a high rate with an expected increase of 20% against 2004, reaching $4.2-4.4 billions. Vietnam will focus particularly on source technological projects. Fields for attracting foreign investment will be expanded. Much effort will be made to increase the proportion of foreign investment in the overall social investment by 20% and in the country's GDP by 18%, contributing to the country's economic growth.

Foreign Investment into Vietnam

The Law for on Foreign Investment into Vietnam officially came into effect on 1^st January 1998. Since then to the end of 2004, foreign investment into Vietnam underwent a period of 17 years and enjoyed great results, creating an importancet force to push forwardlocomotive for Vietnam’s incessant socio- economic developmenty.

The Law onfor Foreign Investment into Vietnam was amended several times, i.e.: in June 1992, November 1996, June 2000 and 2003. Apart from thatIn addition, the Government, ministries and local authorities have issued guidelines and mechanisms related to attracting foreign investment. All these actions are focused aimed aton building an attractive, clear transparent and effective investment environment, creating all the best conditions for foreign investors to do long-term business in Vietnam.

According to to statistics, the statistical data, in Vietnam, over 5,000 projects are still in effect with a total capital of $45.5 billions. 50 % of these projects come intoare under operation with the total executed realized capital of $26 billions. The foreign investment sector ranked first in import-exportation volume of Vietnam. Specifically,: export reached $8.6 billions,, increasinged 35.6% against last year; import of $10.97 billions, increased 24.4% while the total turnover of the sector wasagainst last year with overall income of $18 billions, increasinged 20%. The foreign investment sector contributes to the country about 15% GDP of Vietnam and approximately 17% development fund for to the country. Foreign investment projects createsd 739, 000 jobs, not to mention tens of thousands of jobsthose that generatewho enjoy indirect income from the projectsfor tens of thousands of workers.

In 2004, the overall foreign investment capital into Vietnam was the highest in recent years, reacheding more thanover $4 billions with an, increase of ed $900 millions millions as against 2003 and was the highest in recent years. Up to date, according to the Foreign Investment AdministrationDepartment, the executed realized capital reached $2.85 billions, increasinged 7.5% against 2003 and surpassing exceeded the expected plantarget of 2.75 billionss. Foreign investment capital for industry always enjoys reaches high percentage (67% of all the projects).

In 2004, Nthere were new points features in foreign investment in Vietnam. in 2004 are: For the first time, the Government state advocated equitization of foreign invested enterprises to set forth the implement equitization in foreign invested companies and took into consideration an integrated commonunified Enterprise lLaw and a unifiedcommon Investment Law so as to for both entrepreneur and investment for the first time, which would createeing a fair play-ground for the entrepreneur business community, as well as domestic and foreign investors. The gGovernment enables stronger decentralization reached a more forceful division in responsibility, by allowing Hanoi and Ho Chi Minkh city to grant permitslicences for to foreign invested projects with a capital of $40 millions instead of $10 millions as it was previously stipulated.currently. Other cities and provinces will be allowed to grant permits licences for projects with a capital of $20 millions instead of $105 millions as it was previously stipulated (except for projects in group A)currently.

Up to nowSo far, 60 localities in the country have granted investment permitslicences according to the criteria for local decentralization,. put into practice the division of responsibility in granting foreign invested projects. Ho Chi Minkh city has the most biggest number of decentralizedsuch projects of this type, of with about 1,200 projects withof which with registered capital reached of $2.2 millions. The Southsouth-eastern region has 1,200 of decentralizedsuch projects obtaining permits by the mechanism of division of responsibility, with registered capital reached of $1.9 millions.

10 tolepading localities in attracting foreign capital in 2004: (Millions dollars)

10 leading top regions and countries and territories in foreign investment to Vietnam in 2004: (Millions dollars)

10 leading top localities in attracting foreign investment capital, (as of up to 12^th December 2004): (Millions dollars)

11 leading countries and regions in foreign investment into Vietnam, (as of up to 12^th December 2004): (Millions dollars)

Shortcomings:

However, at present, there exist three outstanding issues of concern in the mean time are:. First, foreign investors thinkclaim that see the Vietnamese country's law system as is fragile unstable and unpredictable with some a number of inappropriate regulations such as: limitinglimitting of percentage of foreign labors below 3%, and setting ceiling price forthe price regulations on of technological transfer. price… Second, shortcoming the country's infrastructure is still poor, the supply of not guaranteed water and electricity supply in some localities is insufficient, which creatinge difficulties for production and business, high cost for transportation and storage is high. in transits… Third, branchy administrativebureaucratic procedures remainincluding those for investment permits , slow receipt and assessment for investment projects are bulky,time-consuming project application and appraisal process is time consuming, and scope of projects eligible for permissionlicence is limited. narrow range for registered projects to be approved…Foreign investment forecast in 2005: According to Mr. Vu Anh Tuan, Ddeputy dDirector of the Department of fForeign iInvestment administration, the Ministry of Planing and for iInvestment, foreign investment into Vietnam in 2005 will cocontinues to growth at a high rate with an, expected to increase of 20% against 2004, reaching $4.2-4.4 billions. Vietnam will, and especially focuses particularly on especially source technological projects. , widening the fFields for attracting foreign investment will be expanded. Much effort will be investedmade to increase the percentageproportion of foreign investment ofin the overall social investment toby 20% and inof the country's GDP byto 18%, contributing to the growth of the country's economic growth sectors., aiming at increasing the percentage of foreign investment in the overall social investment fund up to 20%, contributing 18% of GDP and pushing forward other economic sectors in the country.