BUSINESS REPORT be imported and exported are subject to a government list on such goods. FIEs licensed to trade, including both JVCs and WFOCs, may import goods and sell the imported goods to one or more local licensed distributor(s) for onward distribution. Pursuant to Decree 23, "distribution" means activities of wholesaling, retailing, agency for purchase and sale of goods and franchising in accordance with the law of Vietnam. Where a company is granted a specific distribution right, it is given the right to directly sell goods to end users, either organisations or individuals (retail) or the sale of goods to traders or other organi sations, excluding the sale of goods directly to end consumers (wholesale).
INVESTMENT CER1'IFICATE
dance with Vietnam's WTO commitments. Distribution services include (i) commission agents' services, Oi) wholesale trade services, (iii) retailing services, and (iv) franchising. Upon accession to the WTO, a foreign investor was allowed to establish a JVC with local partners/shareholders to engage in distribution services, with the foreign investor's capital contribution to be no more than 49 per cent of total charter capital. From January 1, 2008 a majority foreign owned JVC was permitted and as ofJanuary 1, 2009, WFOCs were permitted in the distribution sector.
TRADING RIGHTS VS. DISTRIBUl'ION RIGHTS Vietnamese law distinguishes between the acts of "trading" and "distribution". The rules applicable to foreign invested enter prises (PIEs) wishing to engage in these activities differ depending on each activity. Where a company is granted the right to engage in import and export (trading), it is given the right to directly import and export permissible goods, without having to go through a State owned or local trading company. The right to import is the right to bring goods into Vietnam and includes the right to sell such goods to properly licensed distributors in Vietpam. The goods that may
outlet ends on the expiration date of the Ie. The establishment of a second and subse quent retail sales outlets is permitted on a case-by-case basis subject to compliance with the so-called "economic needs test" (ENT) , which consists of analysis of a number of factors, including the proposed number of retail sale outlets, market stability, population density in the relevant city/province of the second or subsequent retail sales outlets, and conformity with the city's or province's municipal planning. An FIE wishing to establish a second or subse quent retail sales outlet(s) -must conduct procedures to obtain a license for such outlet(s). The licensing authority shall issue the licence upon receiving approval from MolT. The licensing process is to take from 33 to 48 working days, but in practice may take longer.
All foreign investors must apply for and obtain an investment certificate (IC) prior to undertaking their first investment project ANTICIPATED CHANGES in Vietnam. An IC acts as the legal Foreign investors are awaiting the issuance document establishing the relevant FIE in of a new Decree repealing Decree 23 on retail Vietnam as well as setting out the specific activities, which may resolve outstanding issues on retail definition, establishment of business activities such FIE may engage in. In investment projects in conditional retail sales outlet(s) and the ENT. Under the sectors such as distribution services, foreign draft new Decree dated September 2010 (the investors must undergo an investment draft), the definition of "retail" has been evaluation by the licensing authorities and amended in line with the WTO agreements, other relevant authorities such as Prime i.e. "the activity of selling goods directly to Minister, the Ministry of Industry and Trade end-users for the purpose of consumption by (MolT) or other ministries, for principal individuals and households." The right to establish retail sales outlet(s) approval or consulting ideas. Such authority will ultimately exercise its discretion on outside the first retail sales outlet shall be whether to issue the sought-after licence. considered based on appropriateness to The exact procedure and documents municipal planning and three criteria: required for the evaluation licensing process number of retail sales outlets, market will depend on many factors, including size, stability and population density. The draft provides more clearly the contents, authori scale, location and type of investment. Specific distribution business license sation and principles for establishment of (the "baby permit"). FIEs involved in national and municipal planning for retail trading and/or distribution activities require outlets. In order to reach unity of regula a separate distribution-specific "business tions on "municipal planning" between licence" in addition to an Ie. For existing national level and provincial level, the draft FIEs, the relevant provincial people's stipulates further on the principle of committee is responsible for issuing such planning retail sales oudets allocation, business licences after receiving written timeframe to complete the allocation, and confirmation from MolT that the appli procedures for publicising and approving cation meets the" conditions agreed to by drafts of allocation. The draft also provides some further Vietnam in its international commitments. For newly-established FIEs, the investor details on the ENT, with methods on calcu must submit "an application dossier for lating retail sales outlets within a relevant investment" to the licensing authority. This geographic area, evaluating the stability of body must obtain the written approval of the current market, and defining the density MolT before issuing an "IC" establishing of the population. It is not currently known the FIE and acting as the legal basis for it to when the new Decree will be finalised but it conduct stated trading and/or distribution is likely it will be issued and become effective in early 2011. activities. In conclusion, as Vietnam's legislative Establishment of retail sales outlet{s). When a FIE is granted an IC permitting the framework continues to evolve and business of retail distribution services, such investment procedures and practices are enterprise has the right to establish its first simplified, it is becoming a far more retail sales outlet from which to conduct attractive investment destination from a such retailing without submitting an appli regulatory perspective. Coupled with cation dossier for a licence for establishment Vietnamese consumers' rapidly growing per of its first retail sales outlet. Such FIE is capita income and the country's young prohibited from conducting retail activities population, economic growth and political outside the first established retail sales outlet stability, Vietnam's position as one of the unless expressly licensed to do so. The world's most attractive destinations for retail • operation duration of the first retail sales investment is likely to remain.
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VIETNAM EcONOMIC TIMES, JANUARY 2011