Vietnam has been a member of the World Trade Organisation (WTO) for half a year but the implementation of its commitments on business rights for foreign investors is not smooth yet.

At the Vietnam Business Forum (VBF) in Hanoi in May 2007, lawyer Fred Burke, head of the working group on production and distribution of VBF, said that many localities had refused to grant investment certificates to foreign investors, even in the fields of business that Vietnam committed to open immediately after becoming a member.

Recent problems associated with the performance of investment commitments of Vietnam originate from a very old reason: a lack of guidance documents. In addition, some contents that Vietnam commits to implement are contrary to regulations in some laws which have not been amended yet. This has been embarrassing for some state agencies but they have done nothing but sit and wait for instructions.

In this situation, the decree guiding the implementation of some commitments of Vietnam to the WTO will be issued in July or August and it is expected to help partly clear hindrances to facilitate the implementation of investors’ business.

The third draft of this decree, which was made public by the Ministry of Planning and Investment, has been looked at by VBF. Thus, once the decree is issued and if it is carried out seriously, the implementation of WTO commitments of Vietnam will be very favourable.

The biggest problem is the difference between some commitments and some current rules and this problem has been solved by the decree.

The draft decree confirms: “All WTO commitments of Vietnam must be explained, applied and implemented not contrary to regulations at the commitment table on services, the WTO accession report and related documents. In case of differences between this decree and other commitment documents, the commitment documents will be applied.”

The draft decree also abolishes regulations in the Vietnamese legal system that are contrary to the WTO accession report and the regulations in the decree.

Some problems in the Enterprise Law 2005 will be also solved, such as the number of representatives required to organise a meeting, the form to approve decisions, and the authority to make decisions of the member council, shareholders meeting.

At the same time, the draft decree also defines what a Vietnamese firm is and what a foreign-invested firm is based on the minimum ownership rate of 51% of capital or shares. This will help minimise confusion in case Vietnamese firms have shares owned by foreigners or vice versa. This is very meaningful for foreign investors, especially those operating in retailing. Because according to the draft decree, if they hold less than 51% of shares in a retailing company, their operations will not be restricted like foreign companies.

At present, licencing agencies in provinces are embarrassed when they receive projects that register to operate in various fields which are opened at different levels, especially when foreign investors have purchased stocks of local firms doing business in different areas. For this issue, the draft decree stipulates the use of the regulations of the area that is restricted the most.

If the investment conditions in the commitment table on services are less advantageous than in legal documents of Vietnam, the document with more favourable conditions will be applied. In addition, investment operations in all fields that are not mentioned in the commitment table on services, the Investment Law, Enterprise Law and other legal documents will be used.

The draft decree also includes the list of areas that are restricted and foreign investors are not allowed to participate in and local enterprises operating in the fields which are not allowed to sell stocks to foreigners. However, the draft also confirms that foreign investors are allowed to buy shares and contribute capital in all the areas that Vietnamese laws don’t prohibit, even though they are not named in the WTO commitment table on services.

This decree is expected to clear many hindrances which have been formed by the habit of “waiting for guidance” of state agencies. However, this will be only a temporary solution because it is unsuitable to the general legal rules.

In principle, the decree has a lower legal value than law so it can’t nullify the contents defined by the law. Thus, the draft decree abolishing some contents of the laws, though they are contrary to WTO commitments of Vietnam, is not good. The decree needs to be upgraded into a law or all the current laws need to be amended to ensure the unification of the legal system of Vietnam and Vietnam’s WTO commitments.