Draft Law on Investment: Breakthrough to promote private investment and enhance national competitiveness

After more than 05 years of implementation, alongside its positive outcomes, the Law on Investment 2020 has revealed several limitations concerning the provisions on investors’ freedom of business, investment incentive and support policies, as well as procedures for carrying out investment and business activities in Vietnam.

With a view to addressing these shortcomings, the Ministry of Planning and Investment has completed the first draft of the Law on Business Investment (“Draft”). The Draft introduces major reform proposals, succeeding and replacing the Law on Investment 2020, with the objective of removing barriers to investment activities, promoting private sector investment, and enhancing national competitiveness. The key highlights of the Draft are as follows:

A significant proposed change under the Draft is the addition of cases exempted from investment policy approval. Specifically, the Draft provides that the following projects shall not be subject to investment policy approval procedures: projects already specified in sectoral or provincial master plans with defined names, scales, objectives, locations, and timelines; projects awarded through land use right auctions or bidding for land-use projects; and mineral exploitation or industrial cluster infrastructure development projects. This change aims to simplify procedures and resolve existing bottlenecks in the current implementation process.

Regarding foreign investment activities, under the current Law on Investment 2020, a foreign investor must have an approved investment project before establishing an economic organization in Vietnam. However, the Draft proposes to abolish this principle, allowing foreign investors to apply for an Enterprise Registration Certificate (ERC) before applying for an Investment Registration Certificate (IRC). This approach increases flexibility for investors but also necessitates stronger control over market access conditions at the enterprise establishment stage, as well as clear guidance on the timeline that the investor must obtain IRC after the issuance of ERC.

Another groundbreaking reform proposed in the Draft is the removal of 17 conditional business lines, including accounting services, rice export, labor subleasing, funeral services, overseas study consultancy, and performing arts, repairing, maintaining of cars, among others.

The Draft also proposes to abolish the list of conditional outward investment sectors and clarify the authority for issuing outward investment registration certificates. Specifically, outward investment projects with capital of VND 20 billion or more shall fall under the licensing authority of the Ministry of Planning and Investment. Projects with capital below VND 20 billion shall not be subject to the outward investment registration certificate requirement; instead, investors will only need to register foreign exchange transactions in accordance with the laws on foreign exchange management.

In addition, a notable revision concerns the adjustment of the scope and criteria for determining investment incentive locations. The Draft categorizes incentive areas into two groups: areas with difficult or particularly difficult socio-economic conditions; and  industrial zones, export processing zones, high-tech zones, concentrated digital technology zones, and economic zones. Accordingly, industrial zones, export processing zones, high-tech zones, concentrated digital technology zones, and economic zones are now established as an independent group of incentive areas, rather than being classified within areas of difficult or particularly difficult socio-economic conditions as before. This approach enables a more tailored design of incentive policies aligned with the characteristics of each type of investment area.

Overall, the Draft represents an important institutional breakthrough, aiming to establish a more open, transparent, and competitive investment environment for both domestic and foreign investors. The proposed reforms — including the abolition and simplification of investment policy approval procedures, enhanced autonomy for foreign investors in enterprise establishment, and the substantial reduction of conditional business sectors — reaffirm the Government’s commitment to fostering private investment and improving Vietnam’s overall investment climate.