Aiming to enhance efficiency, proposed amendments to Vietnam's investment laws promise to address delays and restore momentum for key infrastructure and business projects.
The future looks brighter when today’s obstacles are addressed with effective solutions. Re-establishing investor confidence, handling contractual commitments, and unblocking capital flows are all crucial elements as Vietnam re-evaluates its investment policies and administrative processes.
Decentralization on a large scale
Minister of Planning and Investment, Nguyen Chi Dung, is currently overseeing two significant draft amendments covering five laws related to investment, which will be presented to the National Assembly on October 29. One draft focuses on revising the Public Investment Law, while the other addresses modifications to the Laws on Planning, Investment, Public-Private Partnership (PPP), and Bidding.
This marks one of the most extensive updates in the last few decades to the regulatory framework governing investment and business. Dung anticipates that these amendments will resolve bureaucratic issues, streamline administrative processes, and provide substantial support for investment.
“We are addressing the ‘bottleneck of bottlenecks,’ and if resolved, this could pave the way for true breakthroughs,” Dung commented at a recent National Assembly session.
Minister of Planning and Investment Nguyen Chi Dung at a National Assembly session on October 28, 2023. Photo: National Assembly Electronic Information Portal
With this reform package, Minister Dung hopes to set the stage for meaningful institutional reform. “This time, we’re decentralizing the permitting process for industrial zones and outbound investments. In effect, we’re transferring most decision-making authority,” he explained.
This recent decentralization follows the initial push 20 years ago to allow local governments to approve Foreign Direct Investment (FDI) projects independently. The process has reduced legal risks for ministry staff, which are still common in other sectors where decision-making authority has not yet been delegated.
Navigating legal hurdles
The procedures within Vietnam’s investment and business laws have created complex bureaucratic processes. At a recent National Assembly session, General Secretary To Lam remarked that while public investment spending has not even reached 50% in the first nine months of 2023, the challenges faced reflect legislative issues more than implementation ones.
General Secretary To Lam posed a pointed question: “Why are these issues left unresolved?” Answering himself, he remarked, “It’s because of us.” His comments underscore that the root cause of many investment delays lies in the legislative framework rather than in execution.
Prime Minister Pham Minh Chinh recently established a task force, led by Deputy Prime Minister Nguyen Hoa Binh, to address stalled projects. This high-level body also includes leaders from the judicial and executive branches, reinforcing the government’s commitment to rapid and comprehensive solutions.
In preliminary estimates by the Ministry of Planning and Investment, there are around 160 long-standing projects with a total investment of VND 59 trillion. However, Dung believes this number is likely higher. "The task force will categorize these projects based on whether the issue lies with the investor or the state, ensuring that responsibilities are clearly delineated," Dung explained at the National Assembly.
Addressing investment bottlenecks amid high demand
Vietnam's future infrastructure demands will require hundreds of billions of dollars in investment. Photo: Pham Hai
The Vietnamese economy requires hundreds of billions of dollars to advance infrastructure projects, including highways, metro systems, and energy initiatives. This unprecedented demand heightens the need for effective investment policy, such as Public-Private Partnership (PPP) laws, which may now be expanded to cover various industries outside of state-controlled sectors.
This expansion represents a breakthrough, given that the current PPP law only applies to five key sectors. Despite three years of implementation, the law has seen limited success, with only 31 nationally significant projects underway. The proposed reforms aim to create a pathway for community-centered projects of smaller scales and greater feasibility.
Meanwhile, the real estate market continues to struggle, with roughly 70% of obstacles linked to legal issues that must be addressed promptly if businesses are to survive. Although government task forces have been established to support real estate firms, results have been limited.
Eight stalled Build-Operate-Transfer (BOT) projects face further scrutiny, as misplaced toll stations and other issues require the government to allocate VND 10.3 trillion to buy back certain assets.
A future paved with regulatory reform
Vietnam’s path forward depends on addressing these long-standing challenges head-on. With hundreds of billions of dollars needed to fund infrastructure projects such as the $67 billion North-South High-Speed Railway, the $92 billion metro systems in Hanoi and Ho Chi Minh City, and over $15 billion annually in energy projects, the stakes are high.
With the proposed PPP law revisions allowing investment in nearly all areas of the economy, the groundwork is set for attracting private capital in sectors previously limited to public investment. It represents a pivotal step forward, broadening the potential for investment while reducing reliance on public funding.
In a rapidly developing country, the PPP law alone cannot answer all questions surrounding investment and infrastructure development. This challenge requires a coordinated, multi-sector approach to regulatory reform, setting the stage for growth with laws that foster efficiency, transparency, and economic resilience.
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