Vietnam has so far attracted US$50 billion in foreign direct investment (FDI) from 70 nations and territories around the world. FDI contributes more than 15 percent of the total GDP, 38 percent of total industrial value and 54 percent of the national export turnover.

Last year alone, the country attracted nearly US$6 billion in registered capital, of which US$3.3 billion was disbursed, up 15 percent over 2004 and making up 20 percent of total social investment capital. The foreign-invested sector contributed US$1.29 billion to the State budget, an increase of 40 percent over one year ago and accounting for 12 percent of total budget revenue.

According to the previous Foreign Investment Law, foreign investment was carried out under three forms: business co-operation contracts and joint venture enterprises or wholly foreign invested enterprises.

However, under Government decree 38, the Government allowed a pilot transfer of 12 foreign-invested enterprises to joint stock companies. Some of these enterprises have posted their shares on the Vietnamese securities market.

In fact, several regulations of the Foreign Investment Law have caused certain difficulties for foreign investors in establishing and managing enterprises for their business and investment activities in Vietnam.

For instance, foreign investors are restricted to their selection of forms of enterprise to run investment activities in Vietnam as they are only allowed to set up limited liability companies.

The establishment of foreign-invested enterprises often relates to a specific project and each enterprise is set up in order to carry out one project. Thereby, foreign-invested enterprises are single project enterprises.

In addition, there are many regulations limiting legal capital and capital contributions from foreign investors. The Enterprise Law issued in 2005 will replace the Foreign Investment Law in terms of establishing and managing enterprises.

Accordingly, foreign investors are entitled to select one of four forms of business- joint-stock company, limited liability company, joint venture company and private company to carry out investment projects in Vietnam in the same way as domestic investors can.

Furthermore, foreign investors have the rights to restructure, expand or diversify their business activities. Multi-project enterprises will replace single project ones. A foreign-invested project will be able to implement numerous projects. Limitations in foreign investors’ capital contributions, capital investment for establishing enterprises in Vietnam will be removed.

The previous Enterprise Law has not affected foreign investor currently operating in Vietnam and has created a balance between established or to be established enterprises, as they are entitled to register and launch activities under the new regulations of the law.

In a nut shell, the promulgation of the Enterprise Law has created the same favorable conditions for domestic and foreign investors to choose options for business and management structures. It is worth noting that the Enterprise Law has helped attract more foreign investment, and enterprises operating in Vietnam have expanded their investment and business activities more effectively.