Foreign Investment Reform In Vietnam

In the year 1980, Vietnam became more open to the other economies of the world. The country declared that it would introduce a foreign investment reform in Vietnam, which would fan the ambitions of the foreign investors interested to invest in Vietnam. After launching the “Doi Moi” reform policy the country made little advances in most of the spheres of the economy.
As Vietnam had announced that it would build up an economy, which would assist foreigners to invest, most of the foreigners had flocked here but to their disappointment, the government reforms did not actually help the investors.

Importance of foreign investment in Vietnam:
Importance of foreign investment reform in Vietnam cannot be denied because the more foreign investment a country has the better it is. In fact, foreign investments could actually revive an economy, which is sick by instilling latest technological know how, by generating employment opportunities, introducing recent skills, improving investment, increasing capital assets.

However, an essential requisite for a country to attract foreign investment is that the economy, should have a healthy economic as well as financial foundation. But to ones dismay, this does not hold true in the case of Vietnam.

Incompatibility of Vietnam’s economy and Foreign investments:
Behavior meted out by the government plays an important role in appealing to the foreign investors. The government in Vietnam has not put in much effort to attract the foreign investors but instead has discouraged the investors. In the year 1996, the Vietnamese people campaigned with slogans “social evils”, which stopped the foreign investors from using foreign names for their shops. To top it up, the Vietnamese government had inflated tariffs, due to which carrying out production operations in Vietnam was proving to be quite expensive. Another factor, which caused the foreign investors from continuing their trade in the country was red tape. Meanwhile, the government became quite troubled on observing these negative developments. As such, the need for foreign investment reform in Vietnam was felt by all.
Measures taken by the Vietnamese government:
The government in Vietnam adopted the following measures or foreign investment reform in Vietnam.
The realization that foreign investment was required to uplift the economy instigated the government to do the following:
Bring about alteration in the law pertaining to foreign investment in the country.
Introduction of another Enterprise law
Introduce BIT in association with the United States of America.
Launching of a stock exchange in Vietnam.

Foreign investment law:
The main aim of the law pertaining to foreign investment reform in Vietnam is to attract the foreign investors and to convey to the foreign investors that Vietnam has all the necessary facilities for investment. The law came into effect on 1st July, 2000. One important amendment that has been made in the law is pertaining to the facility granted to the foreigners to mortgage rights pertaining to use of land. There were various other facilities made available in the law related to foreign investment.
Enterprise law:
The Enterprise law was executed on January 1st, 2000. The main advantage of the law is that it allowed registration of businesses without the approval of the government in Vietnam. Owing to the enterprise law, many job opportunities were created and outlined the regulations well.
BIT or Bilateral Investment Treaties with United States of America:
Bilateral investment treaties are effected when a certain amount of instability is prevailing in the country. The BITS or the Bilateral Investment Treaties extend security to the enterprises intending to invest in a country.

Another foreign investment reform in Vietnam is the setting up of a stock exchange in Vietnam. Initially there was very little trading on the stock exchange and included only domestic firms. It was reckoned that if not the foreign companies at least the domestic companies would fare well in their trade. The stock exchange in Vietnam was established on 20th July, 2000. During that period very few companies registered with the stock exchange in Vietnam.

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Last Updated on : 26th June 2013

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