2007 in Perspective
In the concluding part of our series, we look at landmark legal changes in 2007 in Vietnam and China.
Issue 39 - Mar 08

Vietnam
Vietnam's 11 January 2007 accession to the World Trade Organization ushered in the country's most dynamic year of growth in living memory. Double digit increases in exports, tourist arrivals, manufacturing and services, coupled with unprecedented inflows of foreign capital into the country's newly opened securities markets, have sent rents for office space and industrial land on a rapid and sustained rise, with infrastructure struggling to keep up.

For the most part, Vietnam's commitments to the WTO do not directly impact on real estate, facilities and projects. But the WTO accession is part of a larger reform program in Vietnam that includes the introduction of greater market forces into the land and infrastructure sectors. Moreover, the market access commitments Vietnam has undertaken to liberalize trade in goods and services are unleashing new competition and investment that has stimulated demand. Finally, there are important undertakings in the WTO commitments that will play a role in how the market continues to open up.

First, some of the so-called "WTO-plus" commitments that Vietnam undertook to gain accession into the WTO involve allowing foreign investors to participate in Vietnamese companies, including private and Stateowned companies that are involved in property and infrastructure development. These commitments are spelled out in the 528 paragraphs of the Working Party Report that sets out the context for Vietnam's accession to the WTO. Among other things, Vietnam undertook in this document to allow foreign equity participation in local enterprises involved in real estate and property development, as well as infrastructure development, subject to some limitations in terms of lines of business that are considered prohibited, restricted or conditional.

Many of these commitments have already been implemented, first by a substantially amended Enterprise Law, which unified the old, separate legal regimes for foreign and direct investment in 2006, and the Investment Law, which provides specifically for large scale infrastructure projects and their approval processes. Further reforms to the Land Law and its implementing decrees have enabled foreign developers to sell property interests to Vietnamese citizens and certain long-term leasehold rights to foreigners resident in Vietnam. On the other hand, a new Personal Income Tax Law will take effect that imposes for the first time a capital gains tax on gains of individuals from property sales (formerly such gains were only taxable to enterprises).

Secondly, demand for international standard office and residential space has been stimulated by the market access reforms Vietnam is introducing in accordance with the WTO Working Party Report's Schedule on Services. Vietnam is opening its doors to foreign architectural and construction firms, financial service providers, IT firms, telcos, travel service providers and a long list of other service providers and, especially combined with a growing domestic tenant market, this is stimulating demand for high quality office space. On the other hand, current developers are concerned that ongoing restrictions on foreign ownership of retail establishments, which is limited beyond the first establishment by an "Economic Needs Test", will hinder demand for the many retail complexes currently in the approval and implementation process.

Contributed by: Fred Burke, Managing Partner, Baker & McKenzie LLP, Vietnam

NOMINATE NOW

Subscribe Now

Sign Up for Ezine

Past Issues