With its large population, Vietnam is recognized as a potential market offering many opportunities for foreign investors in the health sector. However, in comparison with finance, securities and real estate, the health sector remains less lively in the panorama of foreign investment in Vietnam.

According to the WTO Commitments, foreign medical service suppliers are permitted to provide services through the establishment of 100% foreign-invested medical establishments, joint-ventures with Vietnamese partners, and through a business cooperation contract.

Also under the WTO Commitments, the minimum investment capital for a foreign-invested project in hospital services must not be less than:

• USD20 million for a hospital;
• USD2 million for a policlinic unit; and
• USD200,000 for a specialty unit.

However, it appears that none of the domestic laws issued post-WTO accession mentions the requirements on minimum investment capital. This potential ‘omission’ may be interpreted to mean that Vietnam has yet exercised its right (i.e. the right to require foreign investors to meet conditions on minimum investment capital). Legally, however, the silence of legal provisions on the matter does not prevent authorities from directly invoking the provisions of the WTO Commitments.

In addition to the requirement for an IRC for its project, investors are required to obtain an operation license so as to fully satisfy the conditions of operation of medical establishments. Conditions for operation licenses include:

• To meet requirements under national technical regulations on hospitals;
• To have sufficient practitioners relevant to its scope of professional operation; and
• The person responsible for professional and technical operations of hospitals must have provided medical examination and treatment for at least 36 months.

Telecommunication

The telecommunications sector has developed rapidly over the past few years. Foreign direct investment into the telecommunications sector is severely restricted, even though Vietnam has made concessions in terms of access as part of its WTO Commitments.

Current laws on telecommunications dismantled the monopoly of State-owned enterprises over the telecommunication network infrastructure. At the same time, however, the law established a distinction between non facilities-based telecom services and facilities-based services. Non-facilities based service suppliers are service suppliers which do not own transmission capacity but contract for such capacity including submarine cable capacity, from a facilities-based supplier.

The facilities-based vs. non-facilities-based distinction forms the basis of Vietnam’s commitments under the WTO to liberalize its telecommunications market. As from January 2010, foreign investors are allowed to own up to 51% of the legal capital of JVs with non-facilities-based operators. Foreign ownership of facilities-based operators, in turn, is capped at 49% as of accession and Vietnam is not committed to increase that threshold. The Government seems determined to keep control of facilities-based operators and it has no further long-term commitments under the WTO framework.

Trading activities

When a company is granted trading rights, it is given the right to directly import, export and distribute goods, without having to go through a State-owned or local trading company. The goods to be traded are subject to GATS distribution services commitments and bilateral trade agreements.

Opening the Vietnamese market for trading sector was one of the major points in the country’s WTO accession negotiations. The WTO sets up a schedule and forms of commercial presence dealing in trading. Upon Vietnam’s WTO accession, JVs with Vietnamese partners were required and foreign capital contribution could not exceed 49%. From 1 January 2008, the restriction on capital contribution of a maximum of 49% was raised (to 99%) but the companies still had to be JVs; On 1 January 2009, the restriction was lifted and it became possible to set up a 100% foreign owned company in trading sector.

Foreign investors and foreign-invested enterprises in Vietnam that meet the conditions specified by laws may invest in trading activities. In principle, trading activities include (i) import right, (ii) export right and (iii) distribution right.

Right to export allows foreign-invested enterprises to export to overseas the goods to be imported and purchased domestically by themselves. However, it is not permitted to establish any facilities or trading networks for exporting.

Right to import allows the foreign-invested enterprises to import goods from overseas into Vietnam and sell such imported goods to Vietnamese business entities that have a business registration or the right to export or distribute the goods. It is not permitted to organize or participate in any distribution network for goods in Vietnam.

Distribution includes wholesaling, retailing and agency for the purchase and sale of goods, and franchising.

Wholesaling allows foreign-invested enterprises to sell goods, including goods manufactured in Vietnam and goods imported to Vietnam, only to traders or other organizations but not to end-consumers.

Retail allows foreign-invested enterprises to sell goods, including goods manufactured in Vietnam and goods imported to Vietnam, directly to end-consumers. Vietnam restricts the establishment of additional retail sales outlets after the first outlet. Further retail sales outlets are considered on a ‘case by case’ basis based on an economic needs test (“ENT”) of the locality and based on the following criteria: (i) number of retail sales outlets; (ii) market stability; (iii) population density; and (iv) size of the district where the retail sales outlet is proposed to be set up.

Franchising, as defined by the 2005 Commercial Law, means a commercial activity whereby the franchisor grants the franchisee the right to carry out the business of selling its goods or supplying services under certain conditions. Under the WTO Commitments, as of 1 January 2009, foreign investors are permitted to set up 100% foreign-owned companies or establish their branches to engage in franchising activities. The Ministry of Industry and Trade is responsible for the registration of franchising activities from outside of Vietnam and the Departments of Industry and Trade of cities and provinces are responsible for the management of domestic franchising.

In the form of agency for purchase and sale of goods, a foreign investor is allowed, in its own name, to conduct the sale or purchase of goods in return for remuneration from the customer.