State approval for investment: Is it time to break the bottleneck?

Mentioning the inconsistencies in the Enterprise Law and draft Law on Investment, Cung stressed that the lack of clarity leads to several consequences:

First, the Investment Law overlaps with the Enterprise Law’s scope. It should focus solely on project formation and operation (policy approval, registration, incentives).

Second, all conditions imposed on investment projects follow a pre-inspection approach without post-inspection, adding procedural burdens.

Third, the definition of “business investment conditions” in the Investment Law essentially refers to conditions for capital injection, not conditions for business operations. This forces investors to meet conditions at the approval or registration stage, turning every project, regardless of sector, into a “conditional” one.

This contradicts the spirit of Resolutions 66 and 68 and the Party Chief’s directive, which emphasize moving toward regulation through standards, post-audit oversight, and risk-based enforcement. Rather than facilitating investment, the current laws and draft amendments are making it more restrictive, undermining transparency and obstructing capital flows.

Can you provide specific examples?

The draft stipulates that business investment conditions are applied in the following forms:

a) Licenses;

b) Certificates;

c) Credentials;

d) Written confirmations or approvals from competent authorities;

e) Other requirements that individuals or economic organizations must meet to be allowed to invest in business, even without written confirmation from competent authorities.

The noteworthy thing is that the draft excludes standards and criteria issued by competent authorities from the scope of business investment conditions. This regulation reveals several limitations:

First, it still leans toward a pre-inspection mindset. The design continues to be restrictive, controlling, and prohibitive, rather than fully shifting to a post-inspection approach that facilitates and supports business activities.

Second, it fails to clearly distinguish between pre-inspection and post-inspection. The current provisions suggest that every business sector is subject to both pre- and post-inspection, causing overlap and implementation difficulties.

Third, it contradicts reform policies. This regulation runs counter to Resolutions 66, 68, and General Secretary To Lam’s directive in at least two ways: (i) business conditions must be converted into standards and criteria; (ii) compliance with business conditions should primarily rely on post-inspection mechanisms based on the risk level of goods, services, and the enterprise’s compliance history.

In summary, the provisions on business investment conditions in the draft Investment Law need immediate revision to address the “bottleneck of bottlenecks”:

First, it is necessary to clearly distinguish conditions applied to investment projects from those applied to business activities in conditional business fields.

Second, eliminate the default assumption that all investment projects are subject to pre-inspection conditions.

Third, reinstate provisions on conditional business sectors and conditions in the Enterprise Law, as was the case before 2014.

Fourth, design the system of conditions with a reform mindset: prioritize post-inspection, manage based on standards and criteria, and minimize pre-inspection and “ask-give” mechanisms as in the current draft.

How do you assess the provisions on investment incentives and support in the draft Investment Law (amended)? What aspects of the current approach are outdated or misaligned with the innovation requirements and perspectives in Politburo Resolution 50/2019?

The investment incentive and support regime in the draft Investment Law (amended) follows an outdated path: incentives based on sectors and regions, using old tools like taxes, land, and accounting. Although the draft adds the principle of “applying incentives based on project duration and outcomes,” it fails to provide criteria for measuring “outcomes,” rendering the provision impractical.

This approach contradicts Resolution 50/2019, which emphasizes selective investment attraction, prioritizing quality, efficiency, technology, and environmental protection as key criteria, and favoring projects with advanced, clean technology, high added value, and spillover effects.

The provision on terminating investment project operations in the draft Investment Law is highly controversial. In your view, what are the shortcomings of the current mechanism compared to international practices, and how should it be adjusted to ensure both legal compliance and the legitimate rights of investors?

If the state orders a termination, it must compensate enterprises for damages. If an enterprise violates environmental, security, or other laws, the relevant specialized agency should handle it without referencing the Investment Law. Linking project objectives and scale to the approval process allows authorities to interfere deeply in business autonomy, creating barriers, increasing legal risks, and discouraging investors.

International experience shows that even for serious violations, measures typically involve heavy fines or mandatory remediation, not project termination, as termination impacts multiple stakeholders.

Tu Giang - Lan Anh