- What are the most significant legal or regulatory innovations introduced in the 2024 amended Law on the Capital that specifically enhance Hanoi’s competitiveness in attracting high-quality FDI?
The 2024 Law on the Capital (“2024 Law”) introduced certain legal innovations to attract high-quality FDI as follows:
o Pilot State-backed Venture Capital Fund: Hanoi is provided the authority to pilot a venture capital fund to utilize State budget resources to support high-tech enterprises, science and technology firms, and startups.
o Autonomy: The 2024 Law granted Hanoi greater fiscal autonomy, including increased borrowing limits and revenue retention, enabling the city to fund major infrastructure projects relevant to FDI.
o Regulatory Flexibility: Hanoi now has the authority to enact regulations and policies tailored to its unique economic and social needs, allowing for more responsive and investor-friendly environments.
o Simplified licensing procedures: The 2024 Law introduces the digitalization of licensing procedures and simplifications of licensing procedures in Hanoi.
- The amended Law introduces the ability for Hanoi to establish a state-backed venture capital fund targeting high-tech and innovative startups. From a legal and investor perspective, how feasible and attractive is this instrument for foreign investors?
I do believe that the State-backed venture capital fund is very attractive for foreign investors since the fund provides investors with access to early-stage capital for high-tech and innovative startups, potentially leading to high returns. Further, investors may benefit from the backing of the state, which can offer stability and credibility to ventures. Overall, the fund is a promising instrument for investors seeking to engage in Hanoi’s high-tech sector.
- What tax incentives or land-use concessions under the amended Law could serve as game-changers for strategic foreign investors, particularly those in high-tech, clean energy, or infrastructure sectors?
The newly introduced Corporate Income Tax (CIT) incentives with a preferential rate of 7% for 33 years for large-scale high-tech investments can act as a game-changer for high-tech investors. Also, according to the 2024 Law, investors in high-tech parks may receive exemptions from land lease fees and reimbursement for land clearance expenses. These incentives can attract foreign investors in high-tech sectors to make their moves in Hanoi.
- To what extent do the procedural simplifications (such as streamlined customs or licensing mechanisms) under the new Law address long-standing bureaucratic hurdles that have deterred foreign investment in Hanoi?
I have practiced law in Vietnam for more than 25 years, and the licensing procedure indeed is one of the main hurdles for foreign investors investing in Hanoi. The 2024 Law introduced more straightforward procedures for investment registration and licensing with clear guidelines to improve predictability and reduce the risk of arbitrary decision-making. Foreign investors can now refer to the mentioned provisions under the 2024 Law to deal with licensing authorities to support their cases. In my opinion, the procedural simplifications can address the long-standing concerns and enhance Hanoi’s appeal as an investment destination.
- The Law grants Hanoi greater fiscal autonomy, including increased borrowing limits and revenue retention. From your experience advising multinationals, how might this expanded fiscal space influence investor confidence and the city’s capacity to fund major infrastructure projects relevant to FDI?
Greater fiscal capacity allows for more robust investment in infrastructure, giving Hanoi more capacity to fund major infrastructure projects. Also, the enhanced creditworthiness under the 2024 Law provides Hanoi with the ability to manage and retain revenue, improving Hanoi’s credit profile, potentially leading to better financing terms for investors. A more autonomous fiscal environment can also lead to more consistent and reliable policy implementation, reducing investment risks. These factors collectively enhance Hanoi’s attractiveness as a destination for foreign investment.
- How does the amended Law align with Vietnam’s broader national strategy to attract FDI amid shifting global supply chains and emerging regional competition in Southeast Asia?
The law supports the development of high-tech parks and innovation hubs, in line with Vietnam’s goal to become a leader in technology and innovation in Southeast Asia. Moreover, the increased fiscal autonomy enables Hanoi to invest in infrastructure and human capital, addressing key factors that influence foreign investors’ decisions. The introduction of targeted incentives, such as tax breaks and land-use concessions, positions Hanoi as a competitive destination for strategic foreign investors. These measures demonstrate Hanoi’s commitment to supporting Vietnam’s national objectives and enhancing its position in the global investment landscape.
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Please do not hesitate to contact Dr. Oliver Massmann at [email protected] if you have any questions. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
