The Evolving Legal Landscape for Foreign Investment in Vietnam
Dr. Phan Huu Thang, the former director of the Foreign Investment Agency, advocates that the revised Law on Investment, coupled with strategic enhancements to the broader legal framework, is capable of establishing a more transparent and appealing operational setting for foreign investors in Vietnam.
An examination of Vietnam’s investment legal system, covering the period from December 1987 to November 2025, a span of nearly four decades, clearly demonstrates the sustained commitment of the Party and the state to its continuous improvement.
This legal evolution has closely tracked the country’s various developmental phases and consistently responded to the complexities of the international geopolitical environment.
The Law on Investment itself has been a pivotal instrument, reflecting the enduring focus of the Party and state on investment, particularly foreign investment.
It has actively addressed known weaknesses and allowed for timely solutions to new issues, thereby reinforcing the nation’s foundational investment structure.
This direction was formally articulated in August 2019 through the Politburo’s Resolution No. 50-NQ/TW, which provides strategic direction for institutional and policy enhancement to improve the quality and efficiency of foreign investment cooperation through to 2030.
Key tenets of this resolution include affirming the foreign-invested sector as a vital part of Vietnam’s economy, deserving of encouragement and support for long-term growth.
It mandates a proactive and selective approach to attracting FDI, prioritizing quality, efficiency, technology, and environmental protection.
It places emphasis on projects involving advanced, new, high, high value-add, or clean technologies, significant spillover effects, and integration into global supply chains.
Furthermore, the strategy promotes diversifying investment partnerships while strictly maintaining national defense, security, social stability, and strengthening the economic independence and self-reliance of the nation.
Resolution 50 succinctly captures the strategic guidance from the Party and state on both general investment and the specific strategy for attracting foreign capital, adapting effectively to ever-changing domestic and international circumstances.
Addressing Legislative Fragmentation and Instability
The practical endeavor of crafting a supportive legal environment for foreign investment necessitates action beyond the scope of merely amending the Investment Law.
Vietnam has simultaneously sought to expand and reinforce its bilateral and multilateral commitments by executing numerous agreements aimed at encouraging and safeguarding investment with various international partners.
Concurrently, core domestic laws that directly impact investment—such as the Land Law, Commercial Law, Labour Code, Construction Law, Real Estate Business Law, Housing Law, and the Law on Credit Institutions—have been continuously updated and refined.
A crucial task in refining the investment legal system, which is a primary goal of the amended Investment Law, involves scrutinizing and revising legal documents that are low in quality or suffer from overlapping provisions.
Several structural issues must be tackled during the amendment process.
The sheer volume of investment-related legal documents is substantial, and they are dispersed across various laws and lower-level instruments.
Some existing regulations lack synchronization, leading to overlaps, contradictions, or provisions that actively negate one another’s impact.
Moreover, the caliber of certain normative legal documents is a recognized concern.
Many regulations prove impractical, generating unnecessary difficulties and complications for enterprises and individuals in their commercial and manufacturing activities.
At the same time, regulatory stability in investment remains a challenge due to frequent modifications to tax incentives, land policies, and administrative procedures, which severely hampers businesses’ ability to reliably forecast performance and develop sound medium- to long-term plans.
In the context of the digital economy, new business models that leverage digital technology are gaining acceptance, yet the regulatory frameworks have not kept pace.
This lag, combined with limited financial resources and a deficit of skilled labor, has slowed the widespread adoption of digital methods.
Many regulations still rely heavily on physical documentation, and the transition toward digital or online procedures is currently slow and constrained.
Strategic Adjustments for Investment Promotion and Protection
Policymakers must integrate two additional strategic considerations into the effective application of the current Law on Investment.
Firstly, despite the significant inflow of 100 per cent foreign-owned investment, especially given the country’s recent economic progress, policy direction should pivot to actively encourage more joint ventures with domestic companies.
Secondly, Vietnam should promote outward investment into emerging markets that demonstrate a favorable environment for Vietnamese capital and products.
International examples, such as South Korea, illustrate that successful socioeconomic advancement is often a product of robust domestic investment coupled with strategic outward investment.
This dual strategy can capitalize on the existing successes of Vietnamese enterprises operating abroad, including prominent names like Viettel, PVEP under Petrovietnam, and Vietnam Rubber Group.
To fundamentally strengthen the legal framework for both attracting foreign capital and promoting overseas investment, the amended Investment Law must directly address existing deficiencies.
This encompasses a thorough review of investment legal documents to enhance quality and resolve inconsistencies with international law, along with updating international commitments on market access and intellectual property rights protection.
Issuing clear guiding documents for the execution of laws is paramount to helping investors understand and adhere to regulations, while also defining clear concepts to prevent differing legal interpretations that could obstruct investment activity.
Establishing detailed and transparent investment procedures and conditions for foreign investors will foster a more conducive investment environment and ensure effective state oversight of investment operations.
Maintaining predictable investment policies is a legitimate expectation for all investors.
When policy changes occur—such as increasing land rental fees for projects that have already secured investment certificates—legal safeguards must ensure investors are protected and prevent confusion arising from sudden alterations in Vietnamese laws that affect their established interests.
Should the government need to enact policies that may negatively impact investors, the principle of ‘non-retroactivity’ must be upheld, or fair compensation must be provided for any resultant losses.
Local and Regional Financial Market Implications of Regulatory Reform
The continued refinement of Vietnam’s legal framework carries significant implications for regional capital markets, positioning Vietnam not merely as a manufacturing hub but as an increasingly sophisticated financial and production nexus within ASEAN.
From a financial analyst’s perspective, the emphasis on regulatory stability, streamlined procedures, and better IP protection acts as a potent de-risking factor for large multinational corporations (MNCs) contemplating supply chain reconfiguration from China (the “China+1” strategy).
This enhanced regulatory predictability, particularly the non-retroactive application of adverse policy changes, directly lowers the political risk premium assigned to Vietnamese assets.
This could potentially lead to a higher valuation multiple for listed domestic companies that are heavily integrated into global value chains (GVCs).
Regionally, this move intensifies competition with peers like Indonesia, Thailand, and Malaysia for high-quality Foreign Direct Investment (FDI), forcing them to accelerate their own ease-of-doing-business reforms.
The explicit goal of attracting high-tech and value-added FDI aligns with a transition from labor-intensive to capital- and knowledge-intensive industries, which is essential for Vietnam to escape the middle-income trap.
Furthermore, the promotion of outward investment fosters the internationalization of domestic champions, creating new sources of repatriated earnings and diversifying the country’s economic risk exposure across emerging markets.
This maturation of outbound capital flow is a classic sign of an ascending economy and will strengthen Vietnam’s diplomatic and financial influence within the ASEAN Economic Community.
It enhances its role as a regional economic driver and potentially increases intra-ASEAN capital flows and cooperation in areas like infrastructure and digital economy integration.
The commitment to digitizing procedures also reduces transaction costs and improves governance, which is a critical factor for sovereign credit ratings and the ultimate goal of upgrading the domestic stock market to emerging market status, attracting billions in passive institutional capital.
