In a draft policy paper for the (revised) investment law, the ministry of finance proposes eliminating the outbound investment approval process currently overseen by the national assembly, the prime minister, and the ministry itself. Instead, investors would register their overseas fund transfers with the state bank of Vietnam.

According to the ministry, eliminating this licensing procedure will lead to more accurate and practical management of outbound investments. Investors would register with the state bank after obtaining all necessary foreign investment approvals (investment licenses, business registration certificates, or capital contribution contracts, and purchasing shares in foreign companies).

This approach would reduce administrative procedures, saving investors time and money, and increasing competitiveness for businesses. It would also allow investors quicker access to overseas business opportunities, expand markets, develop raw material sources, and contribute to the national economy.

From a foreign exchange management perspective, the state bank would monitor and inspect investment activities to assess and adjust policies if there's an impact on the balance of payments or foreign exchange reserves. The banking system would also have tools to promptly address non-compliance with reporting regulations, such as suspending money transfers or freezing investment capital accounts.

Foreign currency transactions at VIB bank, 16 Phan Chu Trinh headquarters. Photo: Giang Huy.

Under current regulations, outbound investment is controlled by authorities who identify prohibited or conditionally permitted business sectors and issue investment registration certificates to enterprises.

Specifically, projects with capital of 20,000 billion VND or more, subject to special policies, require national assembly approval for licensing. The prime minister decides on projects with capital from 800 billion VND and above, and in sectors like banking, insurance, securities, journalism, and telecommunications with capital exceeding 400 billion VND.

As of the end of June, Vietnam had 1,916 active outbound investment projects with a total capital of 23 billion USD. Over 67% of these projects have capital under 20 billion VND. Nearly one-third of projects have a scale of over 20 billion VND, accounting for 98.3% of the total capital. The remaining projects have capital under 1.2 billion VND. These projects are subject to investment approval by the prime minister or require outbound investment certificates.

The ministry of finance observes that outbound investment by Vietnamese enterprises is becoming increasingly common. This trend offers several benefits, including market expansion, increased revenue, access to technology and modern management practices, and cost reduction for businesses.

Regarding the rationale for eliminating outbound investment licenses, the ministry of finance points out practical issues that need to be addressed to ensure effective state management and expand investment and business freedom for enterprises.

Under existing regulations, investors seeking to transfer capital abroad must navigate multiple licensing steps. Authorities scrutinize the form, scale, location, and capital sources of the project. The ministry of finance deems this approach unreasonable, especially for private capital projects, as these ventures must comply with the laws of the host country. Vietnamese law doesn't clearly define the jurisdiction of domestic regulations versus those of the recipient country.

Another drawback is the current mechanism's focus on project approval, which makes it difficult to hold investors accountable after they've transferred funds abroad. The primary goal of investors is to conduct foreign exchange transactions for overseas business operations. Complex procedures can cause investors to miss opportunities, particularly in deals requiring swift decisions.

Citing international experience, the ministry of finance notes that most countries only control outward capital flows, applying prohibitions or restrictions in limited cases to maintain macroeconomic balance and ensure the legality of capital sources. Currently, only Vietnam, Laos, and Indonesia maintain licensing requirements for this activity.

China still issues licenses but has relaxed its approach, only managing large projects or those in specific sectors. Other countries have transitioned to a system where investors declare and register their outbound capital with the banking system.

Phuong Dung