4.1 Barriers to investment access

Although Vietnam has switched its older licensing system to a registration regime in some investment projects and reformed its licensing process such as the introduction of the "one-stop service window" for the simplification of licensing procedures, these measures have not, to date, produced the intended results. The licensing process is still very exacting and time-consuming.

The Implementing Regulations for the Law on Foreign Investment provides that the Vietnamese government encourages foreign investment in prospecting, exploiting and finely processing mineral resources, but restricts foreign investment in mining and processing petroleum and rare and precious minerals. The Ordinance (No.10/2005/CT-TTg) issued by the Vietnamese Prime Minister in April 2005 demands the relevant central ministries and local governments to review mining business in the country and to enforce a more stringent administration in granting a permit for mining. Foreign participation in some important and large-scale mining projects, for example, the projects of aluminum ore and iron ore exploitation currently under negotiation between China and Vietna m, is restricted to joint ventures with Vietnamese partners, in which the Vietnamese side shall have a controlling share. The Vietnamese government decided in October 2005 that joint ventures with foreign partners would be permitted for mining projects with an annual output of over 1 million tons of aluminum oxide and for aluminum metallurgical plant project to be established after 2010, with the condition that the Vietnamese side shall have a controlling share.

As to the automobile and motorcycle sectors, Vietnam issued a regulation in November 2003, prescribing that the ratification for new foreign invested automobile and motorcycle assembling projects be suspended unless all the products are for export. However, domestically invested enterprises are not subject to this restriction. In the first half of 2005, the Vietnamese Prime Minister granted a special investment permit of automobile assembling project respectively to Japan's Honda Company and Malaysia's JRD Company.

Vietnam only permits foreign investment in iron and steel, cement, and coal industries in the form of joint venture or cooperative enterprises.

There is a clearly defined time limit, which ranges from 5 to 30 workdays, for Vietnamese governments at various levels to process investment applications from foreign investors. However, foreign investors often complain that investment application procedures are very complicated and the examination and approval period is too lengthy. It sometimes takes up to several months, half a year or even longer, to have an investment application approved.

4.2 Barriers to investment operation

The productive capacity of an enterprise producing or assembling motorcycles in Vietnam was usually decided by the approval from the government. The General Office of the Vietnamese Central Government issued a circular (No.1854/VPCP-HTQT) in April 2005, lifting the output restriction on motorcycle assembling enterprises and leaving the matter of output to the market forces and the enterprises themselves.

Nevertheless, the Vietnamese government still directly interferes in the production of a motorcycle enterprise, requiring that principal machine manufacturer produce more than 20 percent of the motorcycle parts and components, including the main frame, and that motorcycle engine manufacturer produce at least one of the eight components of a motorcycle engine.

In addition, Vietnam continues to require foreign investors in the electronics, automobile, cane sugar, dairy, paper processing, and wood processing sectors to use local content.

According to the relevant regulations, no more than 3 percent of the total number of employees in Vietnamese enterprises, including state-owned and foreign- invested enterprises, may be foreigners – up to a maximum of 50 foreign employees. Foreign representative and branch offices in Vietnam are not subject to this maximum limit, but the approval of the chairman of the relevant people's committee is required for the employment of foreign labor.