VIETNAM: INVESTMENT CLIMATE STATEMENT APPENDIX

UNCLAS SECTION 01 OF 03 HANOI 002068

SIPDIS

UNCLASSIFIED

SIPDIS

STATE FOR EAP/BCLTV
STATE FOR EB/IFD/OIA
DEPT PASS TO USTR

E.O. 12958: N/A
TAGS: EINV EFIN ELAB KTDB PGOV OPIC VN FINREF IPROP LABOR
SUBJECT: VIETNAM: INVESTMENT CLIMATE STATEMENT APPENDIX
2004

REF: STATE 141379


1. This cable provides the suggested text of the 2004
Investment Climate Statement Appendix for Vietnam. As
requested reftel, post has also sent the ICS/A via email to
EB/IFD/OIA Alexander T. Bryan.

2.Begin text of the 2004 Investment Climate Statement
Appendix for Vietnam:

Vietnam - July 2004 Appendix to 2003 Investment Climate
Statement

This appendix serves as an update to the 2003 Investment
Climate Statement for Vietnam. It has been provided to
assist investors in the interim period resulting from the
U.S. Government's decision to begin publishing the Country
Commercial Guide (of which the Investment Climate Statement
is a chapter) on a calendar year basis, in January instead
of August.

The United States Government has reviewed the 2003
Investment Climate Statement for Vietnam, and has noted the
following changes that have occurred since its publication.
In most circumstances, if a portion of the 2003 Investment
Climate Statement has not been modified in this appendix,
it is because the U.S. Government is satisfied that it
continues to accurately reflect the state of affairs in
Vietnam as of July 2004.

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Openness to Foreign Investment:
--------------

In an effort to unify the laws governing foreign and
domestic investment, the Government issued Decree 38 in
April 2003 providing for the conversion of a number of
foreign invested enterprises (FIEs) into foreign invested
shareholding companies (FISCs). The conversion option is
only available to joint ventures (JVs) and FIEs. A FISC
must continue to implement the approved investment project
of the former FIE and will be entitled to preferential
treatment under the Law on Foreign Investment and its
implementing regulations. Nevertheless, the rights of
FISCs' shareholders and the organizational structure of the
FISCs will be governed by the Law on Enterprises, the same
as for domestic shareholding companies. A FISC must have at
least one foreign founding shareholder and the total
shareholding of the foreign founding shareholder(s) must be
at least thirty percent of the FISC's chartered capital
throughout the life of the company. FISCs will be permitted
to list on the Vietnam stock exchange.

Only a limited number of FIEs were selected by the Ministry
of Planning and Investment (MPI),in consultation with
other ministries, for conversion into FISCs. To qualify for
conversion, a FIE must have been in operation for at least
three years, it must have made profits in the year
immediately preceding the year of conversion, and its legal
capital must be fully paid. All conversions are subject to
the Prime Minister's approval.

As part of the tax reforms and as a financial incentive to
foreign investors, the Ministry of Finance issued Circular
26 in March 2004 abolishing profit remittance tax for
foreign invested enterprises.


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Conversion and Transfer Policy:
--------------
No significant changes since 2003.


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Expropriation and Compensation:
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No significant changes since 2003.


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Dispute Settlement:
--------------
No significant changes since 2003.


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Performance Requirements and Incentives:
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No significant changes since 2003.

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Right to Private Ownership and Establishment:
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No significant changes since 2003.


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Protection of Property Rights:
--------------
The GVN reversed its decision to move responsibility for
trademark registration from the National Office of
Industrial Property (NOIP) to the Ministry of Trade in
Decree No. 28/2004/NC-CP dated January 16, 2004.


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Transparency of the Regulatory System:
--------------
In 2002 the GVN amended the Law on the Promulgation of
Legal Normative Documents to require that all legal
documents and agreements to international conventions be
published in the Official Gazette. As of July 2003, the
Official Gazette has been published on a daily basis.


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Efficient Capital Markets and Portfolio Investment:
--------------
As part of its stated efforts to encourage foreign
investment and to promote the development of the relatively
new stock market, the Government issued Decision 146 in
July 2003 abolishing the equity limit of a single foreign
organization or a single foreign individual in a listed
Vietnamese company.


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Political Violence:
--------------
Large demonstrations by ethnic minorities in the Central
Highlands occurred again in 2004.


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Corruption:
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No significant changes since 2003.


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Bilateral Investment Agreements:
--------------
Vietnam concluded 2 bilateral investment agreements with
Japan and Namibia.


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OPIC and Other Investment Insurance Programs:
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No significant changes since 2003.


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Labor:
--------------
No significant changes since 2003, except the number of
strikes rose from 79 cases in 2002 to 119 cases in 2003.


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Foreign Trade Zones/Free Ports:
--------------
No significant changes since 2003.

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Foreign Direct Investment Statistics:
--------------
Statistics will be updated in the next full revision of the
Investment Climate Statement, which will be published in
January 2005.
End text of Investment Climate Statement Appendix for
Vietnam.
BURGHARDT