What exactly does “foreign-invested enterprise” mean?

To date, Vietnamese enterprises have been automatically considered foreign-invested enterprises if foreign investors hold any stakes at all in the enterprises. However, according to the WTO General Agreement of Trade in Services (GATS), foreign-invested enterprises are entities with foreign ownership ratios of over 50 percent.

This means that only enterprises with the foreign ownership ratio of over 50 percent are subject to the limitations for foreign enterprises in the fields of trade and services under Vietnam’s WTO commitments.

Meanwhile, Pho 24, Kinh Do confections and a lot of other brand names have been facing difficulties in expanding business and distribution networks because they don’t know whether or not they are subject to the limitations set for foreign-invested enterprises.

Investors have been urging policymakers to issue criteria to classify which enterprises are considered foreign-invested enterprises.

Lawyer Tran Anh Duc from Vilaf Hong Duc Law Firm said that it is very important Vietnam define this term in order to implement its WTO commitments.

Right after issuing Resolution No 71 ratifying the protocol on Vietnam’s WTO admission, the Ministry of Planning and Investment began doing research on the classification of enterprises in which foreign investors make capital contributions.

A draft decree on this classification system was compiled by the ministry and submitted to experts for their opinions. Most experts agreed with the suggestion that an enterprise ought to be considered a foreign-invested enterprise if 30 percent of its stakes are held by foreign investors.

“We were asked for our opinions about the draft, but there has not been any official information announced about the issue,” Duc said. “We think that concerned agencies need to officially announce the exact time they plan to promulgate documents guiding the implementation of WTO commitments.”

Meanwhile, an official of the Ministry of Planning and Investment said that drafts are still being put on the table for consideration.

The official added that Vietnam will most likely apply regulations common throughout the world instead of promulgating its own specific criteria. However, a new problem has arisen: Some individual business fields, like the banking sector, have their own specific regulations regarding foreign ownership limits. This means that foreign-invested enterprises in different fields have different participation limits.

Meanwhile, a source from the Ministry of Justice said that this ministry is also compiling a document related to defining “foreign-invested enterprises”.