OUR MOST ESSENTIAL ADVICES ON DOING BUSINESS IN VIETNAM
1- Do not assume that in Vietnam you may do any business which is not prohibited by Vietnamese laws and regulations. Make sure about specific procedures and requirements.
2- Do not spend time or money on seeking to do business in Vietnam unless you are very experienced in doing business in one more other similar countries.
3- Given the relative novelty of the country as an investment destination, the assistance of a local expert is essential. From the inception of your arrival in Vietnam use a very good, experienced consultant, but be careful with such "super consultants/fixers" who promise the world but are short on delivery.
4- If you employ a local consultant to assist you in doing business in Vietnam, make sure he or she is a reputable person and backed up by a duly organized consulting company, who can prove he or she has the contracts claimed. The full terms of the employment should be set forth in an agreement before the person does any thing for you with an expiration date if defined goals are not met by a time or times certain.
5- If you employ a Vietnam - based foreign law firm to assist you in doing business in Vietnam, choose only such who have been in Vietnam for at least three years and are working out of an office rather than a hotel room.
6- Contacts are vital in Vietnam, but it can be difficult to assess whose contacts are genuine. The best approach is not to act too precipitously and become as knowledgeable as possible before making any commitment to anyone. Since the most important contacts are in Hanoi, the consultant should have a branch/ office and connections in the capital.
7- Do not compensate anyone for promises - compensate them only for provable performance.
8- Do not assume your Vietnamese counterparts will use a lawyer or one familiar with Western ways of doing business and do not allow yourself to be intimidated by their not doing so or their unhappiness that you are using a lawyer. Unless you want your investment to become a charitable case.
9- No mater how well the local businessmen appear to speak or understand English, do not assume that they understand you or that you understand them. The same applies to translators.
10- Do not assume that any local businessman can understand Western ways of doing business or Western business concepts. The same applies to translators.
11- Do not assume that even seemingly inconsequential failure(s) to comply with the law and/or regulations of Vietnam will not cause you to face a possible loss or forfeiture of your investment in a project.
12- Do not assume that all Vietnamese you deal with have the same concept of fairness and fair dealing that you might or would expect to find in other market developed countries.
13- Be prepared for laws and regulations that are incomplete, ambiguous and subject to different conflicting interpretations by different government agencies.
14-If you are to have a Vietnamese partner, make sure the partner is responsible - ethically, morally and financially and spare no effort and cost in determining such before you sign or agree to anything with such partner.
15- Do not fail to provide for the possibility that if the project requires more equity or debt financing and/ or guarantees than the parties originally provided for and the Vietnamese joint venture partner is not able to put up his share of the additional funding or guarantees required that there is a provision adjusting upward your equity interest and/ or your profit participation if you are required to provide or cause to be supplied the additional equity, debt or guarantees.
16-Do not leave anything essential to the success of the transaction to "trust me", and do not be intimidated by cries "the agreement is too long or too complicated". The guiding principle must be: does the agreement adequately and clearly include all of the protective provisions it should for your investment and have all of the possibly adverse consequences that can flow from something going wrong in the transaction been anticipated and properly dealt with?
17-Do not forget that in the last analysis it is also not "what you can gain" that counts in the investment, but, rather, "what can you afford to lose" and "how do you keep your losses to a minimum".
18-You must endeavor to foresee and incorporate in the original documentation for the investment what adjustments will need to be made in the terms and conditions of the investment with your joint venture partners and/ or with the Vietnam Government if the results of the investment differ significantly from those originally anticipated. If you do not anticipate and provide for these changed circumstances in the beginning, you may find your joint venture partners very unreceptive to changes later in which case you may be forced to abandon the project and loss whatever investment you have made.
19-Obtain in advance all the governmental approvals you can anticipate will be required and such assurances as can be reasonable obtained from the highest possible level of the government that the terms and conditions of your investment (including taxes, duties, import and export quotas etc) are not only approved but will not be changed without your consent. The higher you go the more "insurance" your project should enjoy.
20-Make sure the investment certificate granted sets forth unambiguously all of the approvals and incentives you require for the operation of your business and do not hesitate to appeal if the terms of the investment certificate fall short of those you requested in your investment application.
21-Do not think for one minute that any and all approvals from the national government will open the door to your doing business in any of the provinces of Vietnam. You must be prepared to and must make sure that you have in hand all of the necessary permits from the provincial and local authorities that are required for the project and obtain them at the same time as obtaining approvals from the national government. Such local authorities are a power and an obstacle in and of themselves.
22-Do not make significant investment in or in connection with the project until you know for a fact that all governmental approvals have been obtained in the form and substance required from the proper governmental agencies and signed by the proper and duly authorized officials and stamped, dated and assigned a reference number.
23-Do not purchase, lease or rent out property (commercial or residential) unless you are certain that the party selling, leasing or renting the property to you has the full authority of the government to do so and that the terms and the conditions of the lease will be honored by the government. Also, be sure to obtain evidence (after each payment and before the next payment is due) that whatever portion of the payments which are required to be paid to the Government are in fact paid to it.
24-Before entering into a lease or purchase of any real property, make sure the property has been constructed and/ or will be constructed in full accordance with Vietnamese laws.
25- The method and procedures by which disputes will be resolved, no body of law and judicial precedents familiar to Western investors. Arbitration should be provided for in any agreement.
26-At this point in time, arbitration in a foreign investment transaction outside of Vietnam is probably far more preferable than arbitration in Vietnam. The larger the transaction, the more important this is.
27- In fixing the forum for arbitration (if outside of Vietnam), make certain that the award will be enforceable in Vietnam.
28- Make sure that the law to govern disputes in a transaction is clearly set forth in the joint venture agreement and the application and effect of conflicts of law, rules are full taken in account. When and if they arise, must be set forth in precise detail in the joint venture agreement as must the procedures for selecting the arbitrators. If possible, do not limit the arbitrators to only Vietnam citizens.
29-There must be no ambiguities in any language in any document and there should be no "agreement to agree".
30-Agree on all of the essential terms of the transaction now. Do not think that after the "honeymoon" is over (after the agreement is executed) that any other party will agree to anything without a possibly "painful" price being exacted, and the project's future and your investment possibly being severely jeopardized.
31-Performance by the Vietnamese party (ies) and its (their) representatives under the joint venture agreement must be monitored at all times and everything must be done to avoid and/ or to anticipate surprises.
32-If your government offers foreign investment insurance, purchase an amount adequate to cover your investment before you make the investment.
34- Select tough experienced "Asia Smart" management people for your project. Doing business in Vietnam is so complicated that the "educational" experience can be costly.
35- Be aware of the forms of agreement. Just because a particular form of joint venture agreement or joint venture Memorandum and Articles of Association (charter) has been approved by the MPI and/ or other governmental authorities in another similar transaction does not mean it will serve or protect your interests. Each transaction has its own unique characteristics and requirements and they should not be overlooked just because you have been told the "form" worked for someone else in another transaction, similar or otherwise. Also any such form(s) will have been negotiated agreements and you do not necessarily know what trade – offs or position of leverage or compromises resulted in the final agreement(s).
36- Make sure you have obtained every possible tax exemption and tax benefit a available to your investment and project under Vietnamese law in proper documentation from the appropriate national and local governmental agencies before you make the investment.
37- Oral agreements and oral promises are generally notoriously unreliable - anywhere in the world. If it is not in writing signed by all the parties - forget about it.
38- Do not rely on written or oral representations of real or personal property ownership rights or descriptions. All such representations must be thoroughly and independently researched and verified before any documents are signed or any funds invested.
39- Do not sign any documents unless your legal counsel has made certain and assures you that they will meet with the full approval of governmental authorities. Pre - clearance of documents with governmental authorities before they are executed is essential.
40- Make sure that document translations are done by qualified experts and have documents translated into English from Vietnamese translated back into Vietnamese from the English and vice versa to make sure the translations are accurate and in accord in meaning as much as possible.
41- Provide in all agreements that the foreign language version shall prevail over the Vietnamese version if a dispute arises.
42- Avoid, if at all possible, "letters of intent" and/ or "memorandums of understanding" (MOU) and if you feel compelled to sign one, make sure it provides that it is non - binding and that there is a right to terminate even your "moral" obligation to proceed if definitive documents have not been executed between the parties by a certain date. MOU signed with multiple parties for the same project by Vietnamese parties are not uncommon.
43- In preliminary as well as definitive contractual documents provide for the right to terminate the arrangement or obligation to go forward with the project or financial or other obligations if identifiable events do not occur within defined periods of time.
44- Avoid as far as possible, the granting of loans or the disbursement of funds prior to obtaining a satisfactory Investment License, and ensure a secured source of loans payback and currency convertibility.
45- If you are going to manufacture or have manufactured for export from Vietnam any products, make absolutely sure before you invest any significant sum or contract for the purchase of any goods that you or the exporter are assured in writing by the proper government agency (ies) that you or they will have an adequate and guaranteed export quota for the products manufactured and that this quota will be permitted for a defined period of time.
46- If you are going to manufacture for export on the basis of "processing or subcontracting" make sure that you have been permitted by an adequate governmental agency.
47- If you are going to manufacture for export, be sure you are aware of any comply with any Vietnamese local manufacture content requirements so as to ensure your ability to obtain required certificate of origin and/ or export certificate.
48- If you are going to make a substantial investment in a manufacturing facility producing entirely or primarily for the domestic market make sure before you proceed whether your products are considered as "import - substitute" and how many other such projects the Vietnamese Government may have licensed or may be going to license. The Vietnamese Government's policies on import duties and/ or import quotas for similar products may have similar adverse effects.
49- Make sure Vietnamese employees are treated with respect, paid fairly and on time and that Vietnamese labor laws and regulations are strictly complied with. The Vietnamese are extraordinarily sensitive on matters of this type.
50- Be aware of the fact that you may directly recruit local employees only after 30 days the local labor recruitment organizations fail to do it themselves.
51- Do not for get to obtain working permits for your foreign staff.
52- Thoroughly investigate and endeavor to fix (as much as possible) your local labor and consumables costs during construction and operations for as long a forward period as possible to avoid both disruption and holdups.
53- Make sure that whatever permits have been granted to proceed with any aspect of the project have been obtained from the proper authority and have not been of tainted by any irregularity.
54- Make sure before you begin the construction of any project that there are or will be fully adequate and assured sources of power, water, sewage and any other utilities that may be required in order to enable the project to effectively function from day one and make absolutely certain that the ground and sub - ground conditions will adequately support your building.
55- Heavy rains and floods are not uncommon in Vietnam. Make sure that your office and/ or plant and/ or housing facilities are located in areas which will always be above water or otherwise well protected from flooding.
56- The full responsibility for the removal of squatters on land to be utilized in a project must belong to and be at the expense of the government and not the joint venture or the foreign investor. If the joint venture or the foreign investor is to bear or participate in the cost of such removal, iron-clad limits on the amount of such costs must be provided for with responsibility for any additional costs to be borne solely by the Government. The refusal of squatters to move can delay and has delayed projects for years.
57- Make certain that if any permits are required from your home country to engage in or transfer funds for or to a project in Vietnam that you obtain such permits in a timely fashion so that you will be able to comply with the requirements of the Vietnamese Government.
58- Whether you are manufacturing for the domestic market or for foreign markets, if your product requires foreign components make absolutely sure you have proper and iron-clad permits to import the components you require for the period required.
59- Never enter into a 50/50 joint venture. It is an invitation to what could be disastrous deadlock.
60- Be aware of provisions of the Vietnam Foreign Investment Law which in certain instances still give veto rights to the minority partner in a joint venture, and do everything you can to neutralize or minimize the possible adverse effects of such veto rights.
61- Be conscious of the possible specific regulations regarding foreign investment in the real estate sector (Hotel, office building, etc) and some other industries.
62- Be conscious of the possible adverse effects in a particular area of changing weather and ground conditions on the feasibility and/ or viability of your project.
63- Even before you begin to seek to do or do business in Vietnam, make sure you intellectual property rights (trademarks, tradenames, patents, etc) are protected to the maximum extent possible. The technology transfer requirements of Vietnamese law and regulations are unjustifiably severe. You must seek expert guidance before you agree to anything in this area. You may regret trying to be a "nice guy".
64- If you transaction is being done in a area significantly affected by the "public interests" (i.e utilities, ports and harbours, highways, mining, etc) make sure it is done on commercially competitive terms. Too good a deal may be the "undoing" of the deal.
65- In a Business Co-operation Contract (BCC) be very careful with the operations management issues, particularly so-called "Coordination Committee".
66- In a Build, Operate and Transfer (BOT) project, the ability to charge users a sufficient amount to amortize the project(s) costs and secure a reasonable profit and the ability of the users to pay such charges are crucial elements. Everything possible must be done to provide and guard against national and local authorities adversely affecting or changing unilaterally what you are permitted to charges under the BOT Agreement. If adverse changes in the user charges are forced upon you by any government agency, the government must be required to indemnify you against any losses you suffer within specified time limits.
67- If you project will be a significant producer of jobs for Vietnamese workers and/ or result in significant revenues and/ or other benefits for the Vietnamese economy, do not underestimate the special and favorable tax arrangements you may be able to make with the Vietnamese Government.
68- Avoid at all costs, the overpricing or overvaluation of any new or used capital or consumer goods you are importing into Vietnam. Government officials are very attentive to this problem and such conduct can be very damaging to your interests and can cause you insuperable problems particularly if you are in joint venture.
69- The importation of used capital equipment for a project is not looked upon favorably by the Vietnamese Government and efforts to do so must proceed with extreme caution and only with the clear permission of Vietnamese authorities.
70- The Vietnamese banking system is in its infancy and even the Vietnamese are very reluctant to deposit funds in local banks. The lending capacity of local banks is, therefore, very limited.
71- Foreign invested projects in Vietnam for the most party have to be financed from foreign sources since there is very little financing, if any, available for such projects from Vietnamese institutions.
72- Do not commence the construction of any project unless you are absolutely certain you have the requisite land lease for the term required and covering the proper geographical area.
73- Since all land in Vietnam is owned by the Government, there is as yet no "land" as such to be mortgaged for financing or to be purchased or any other purpose by a foreign owned enterprise or a joint venture company. Instead, there is only "Land Use Right" may be mortgaged for financing.
74- The changing and increasing rates of income, export and import taxation in Vietnam can be a very serious problem for business since such changes can shatter the economic assumptions on which a project's justification has been based.
75- Be extremely care not to exceed the authority you are granted by the Vietnamese Government to do business there. The terms of permits to do business granted by the MPI, et al, are construed very strictly against the foreigner or foreign enterprise. Do not take unfair advantage of the good will of the Vietnamese.
76- Do not underestimate the cost of living and doing business in Vietnam.
77- Vietnam has entered into few tax and investment protection treaties or agreements with other countries. In doing your financial analysis of a project, the financial impact of the presence or absence of such treaties or agreements with your country (if such is the case) (particularly the absence of a foreign tax credit) must be carefully taken into account.
78- Do not assume that a Vietnam Government agency or a state owned enterprise you are dealing with has the authority to enter into a transaction with you. Make sure that you are dealing with the properly authorized agency or enterprise and/ or one that will without question be authorized to deal with you and enter into the transaction contemplated.
79- There is considerable competition among local enterprises claiming (sometimes rightfully and at other times erroneously) authority to enter into the same or similar transactions.
80- Be conscious of the special problems and extra costs to a company's operations that can be caused by the inspections of company accounts that are permitted under Vietnamese law by local tax authorities, the General Department of Taxes and the MPI and possible reassessments or revaluations. There is no statute of limitations in respect of tax audits and therefore any tax years of a joint venture can be reassessed at any time.
81- Be aware of the fact that almost all the local (province/ city/ management board of industrial zones/ EPZ) authorities may grant to you Investment License, but subject to some specific conditions like kind of product/ service, export proportion, investment amounts, etc.
82- Be aware of the fact that the MPI has the power to review the amounts agreed as contributed by parties to a wholly owned venture or a joint venture and to require these to be reassessed. The MPI also has the right to designate an independent organization to do the reassessment and where errors are discovered require cost of the reassessment to be borne by the enterprise or parties.
83- Virtually all foreign invested projects in Vietnam are required to have a fixed term of existence and there is no assurance that at the end of such term the project will be permitted to continue or renewed.
84- Make sure you have adequate foreign health, hospital and disability insurance coverage (which will cover you while you are in Vietnam) before you go to Vietnam. Also make sure your medical insurance provides for the costs of evacuating you by air to medical facilities outside of Vietnam. Medical facilities and the quality of medical care in Vietnam still leave such to be desired.
85- Do not assume that the above suggestions are all that you need to know to do business in Vietnam and properly protect your interest.
