Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field – Vietnam Law Insight



LNT & Partners, Viet Nam November 2015

The Economic Research Institute for ASEAN and East Asia (ERIA) is an international organization established by a formal agreement among 16 heads of government at the 3rd East Asia Summit in Singapore on 21 November 2007. ERIA works closely with the ASEAN Secretariat, researchers and research institutes from East Asia to provide intellectual and analytical research and policy recommendations. Another key ERIA objective is capacity building aimed at strengthening policy research capacities in less developed countries.

This year, ERIA together with law experts in the region works on the discussion paper on Competition Law.

Dr Tuan Nguyen, is incharge of the Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field in Vietnam.


Despite Vietnamese competition authorities’ attempts to control state monopolies in domestic markets during the last 10 year of establishment, this appears to be the key challenge of Vietnamese competition regime. In the process of transitioning from a centrally planned economy to a market economy, the State-owned enterprises (SOEs) sector is perceived as a means to ensure the socialist orientation of the economy as well as preserve national economic goals. For these purposes, SOEs have been offered several advantages ranging from tangible incentives to latent conveniences over the privately owned enterprises. In this context, competition laws and policies should be able to neutralise the advantages of SOEs to level the playing field or else it would be used a shield to protect SOEs from their private rivals.

This paper looks into the issues with the SOE sector in the context of Viet Nam’s political economy and identifies the factors inhibiting the country’s effort to control State monopolies in the last 10 years of competition law enforcement. It provides commentaries on the implementation of competition laws and policies in Viet Nam from the perspective of economic integration, particularly the on-going negotiation Trans-Pacific Partnership.

The author expresses his gratitude to Associate Professor Hayashi Shuya, Graduate School of Law, Nagoya University, for his invaluable support during the drafting of this paper.


Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field _ Dr Tuan Nguyen

Vietnam Opening the Doors for Portfolio Foreign Investment

Following the relaxation of the foreign investment procedure under the new Law on Investment (LOI) and the Law on Enterprise (LOE), the Government has now also relaxed the room for portfolio foreign investment as well as the equitization of state owned enterprise (SOEs).

Furthermore, the Decree provides for the equitization of state owned enterprises (SOEs), and this action is expected to attract more share acquisition in stock markets as well as private equity soon. Currently, a foreign investor may purchase up to 49% of total shares of public joint stock company (JSC) or a listed company.  From 1 September 2015, this general restriction will be removed under Decree 60/2015/NĐ-CP dated 26 June 2015 (Decree 60).

Click here to downloa Decree 60 – Open Doors for Portfolio Foreign Investment

Instead, the new restriction will be subject to the WTO commitments or other specific domestic law (e.g., the 30% cap in the banking sector). If there is a specific restriction under domestic law that has yet to be specified, then the rule of thumb is 49%.

When there is no restriction under domestic law (e.g., for production companies, or distribution companies), then there is no limit for the foreign shareholding ratio. This rule also applies to equitized SOEs, with the aim of attracting more foreign investment in the privatization program.

As for securities companies (or investment banking), those who are eligible to establish 100% foreign owned securities companies are allowed to buy up to 100% equity of local securities companies. Those who are not eligible can acquire up to 51% total shares.

Decree 60 also lifts all restrictions to foreign investors to invest in bonds. With respect to share certificates or derivative products of stocks of JSCs, the restriction will be relaxed as mentioned above. For this purpose, open funds or securities funds that have foreign shareholding more than 51% equity will be deemed as foreign investors.

In addition, Decree 60 addresses the following changes:

  1. Private placement of public companies
  2. Share swap of public companies
  3. Public offering of shares in public companies for swapping shares in non-public companies, or equity in limited liability companies
  4. Private placement filing at the State Securities Commission (SSC) for public companies
  5. Public offering process, use of escrow account for public offering proceeds
  6. Public offering of investment certificates or shares abroad
  7. Redeem shares
  8. Tender offers
  9. Sale of treasury shares
  10. Listing of merged or amalgamated companies
  11. Upcom transaction registration and listing
  12. Real estate capital valuation and contribution to real estate investment fund

While opening the door to, and creating more options for foreign portfolio investment, as along with the deregulation of various procedures at SSC are certainly attractive to foreign investors, it is unclear how other restrictions under different ministries, such as Ministry of Health, Ministry of Education, Ministry of Industry and Trade may impact on the intention of the Government to open up the market.

Note that Art 74.3 LOI allows for the “non-compliant” restriction of business to be valid until 1 July 2016, suggesting there could be some more grounds of clarification and explanation to come.

By Vietnam Law Insight (LNT & Partners)

For more information about this article, please contact the author: Dr. Le Net, LNT & Partners, at the email:

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

IPBA 25th, Hong Kong – “State Owned Enterprises: Its Unique Features & Unique Challenges”

The Inter-Pacific Bar Association’s 25th Annual Meeting and Conference will be held from 6 – 9 May 2015 in Hong Kong.This international legal conference will bring together IPBA members, corporate lawyers, international business lawyers and colleagues from all over the region with the theme: Vision for the Future.

Dr Net Le, Partner at LNT & PARTNERS, Head of Arbitration and Financial Services Practices, will be speaking at IPBA this year in the session “State Owned Enterprises: Its Unique Features & Unique Challenges”.

This session will consider state owned enterprises (SOE’s) from an honest perspective, and more specifically will discuss how  SOE’s are different from private enterprises in terms of their internal approval process, non-business considerations, etc. The panelists will present informed solutions and advise on how to manage cross border investment transactions, and joint ventures with SOE’s. Also to be discussed are recent trends on the privatization of SOE’s against the backdrop of the transformation of command economies into market economies vis-à-vis the realities of the SOE’s negotiating leverage, exemptions and incentives and their continuing presence in large scale investments, infrastructures and resources, utilities, and communications

Please join us in this interesting conversation with the following details:

Topic: “State Owned Enterprises: Its Unique Features & Unique Challenges”. (CBIC Series A: The Future Cross Border Landscape)

Date: Saturday, May 9, 2015

Time: 08:30-10:00

Room: Theater 1, HongKong Convention and Exhibition Center
Committee: CBIC.

You can go to IPBA 25th website for more information about IPBA and registration.

Understanding State-Owned Enterprises in China and Vietnam

In April 2015, leading lawyers, academics, and policy-makers will come together at the historic Fairmont Empress Hotel in Victoria, British Columbia, Canada, for an in-depth look at recent legal developments in Asia and their relevance to the Americas.

The inaugural Asia Desk Forum will provide a unique opportunity for private and public sector lawyers with an Asian dimension to the practice to extend and deepen their knowledge of cutting-edge legal issues through a series of workshops, panels, and lectures, led by those who know Asia best.

Asia Desk Forum

source: Asia Desk Forum

The Forum will consist of an Asian Law Academy, aimed at early-career lawyers, and a main Conference Program, organized around issues of acute relevance to Asian legal practice, such as international arbitration in Asia, doing business in India, recent developments in China and ASEAN, energy law, corporate social responsibility, and Latin America-Asia legal relations.

Understanding State-Owned Enterprises in China and Vietnam

Dr. Tuan Nguyen, one of partners at LNT & Partners, is to address the legal professional and academics with respect to the state-owned enterprises in Vietnam in plenary session. Dr. Nguyen is to focus on legal, political and economic context in which State-owned enterprises operate as well as recent efforts to reform and regulate them in China and Vietnam. The session will also discuss how these efforts may impact the Americas, particularly on a business level.

The rise of state capitalism has been attracting the attention of lawyers, economists, business leaders, and policy-makers, and state-owned enterprises are often the focus of this attention. This session examines the legal, political, and economic context in which these companies operate as well as recent efforts to reform and regulate them. This session will also consider the implications of state-owned enterprises for businesses in the Americas that are looking to invest in or work with partners in China and Vietnam.


For more informaion, please visit Asia Desk Forum