DIRECTIVE

ON A NUMBER OF MAJOR SOLUTIONS TO PROMOTING FOREIGN INVESTMENT INTO VIETNAM

In recent years, thanks to the coordinated application of solutions under the Governments Resolution No. 09/2001/NQ-CP on enhancing the attraction and raising the efficiency of the use of foreign investment capital in the 2001 -2005 period, and the Prime Ministers Directives No. 19/2001/CT-TTg of August 28, 2001, and No. 13/2005/CT-TTg of April 8, 2005, on a number of solutions to create new changes in the attraction of foreign investment into Vietnam, many difficulties and obstacles have been tackled while the countrys investment environment has been constantly improved and become more attractive. As a result, foreign investment activities have overcome the period of depression of the 1997 regional financial crisis, have been incrementally recovered and quickly increased since 2004. Along with the foreign direct investment flow, foreign indirect investment has also seen a remarkable increase, particularly after the Investment Law, the Enterprise Law and their guiding documents took effect. Yet, the results of foreign investment attraction remain incommensurate with the big potential and requirements of capital mobilization to ensure quick and sustainable economic development. The progress and quality of some investment projects remain low and the amount of realized investment capital remains small compared to the registration, failing to boost the transfer of source and advanced technologies into the country.

The guideline on enhancing the attraction and raising the efficiency of the use of foreign direct investment (FDI) capital is manifested in various Party and State documents and was reiterated at the Xth National Party Congress: To enhance the attraction of foreign investment so that it will account for one third of the societys total development investment in five years (2006-2010). To expand domains, geographical areas and forms of FDI attraction, focusing on highly potential markets and the worlds leading economic groups, creating vigorous changes in quantity, quality and efficiency of FDI.

Beginning its 2006-2010 socio-economic development plan, though facing not a few challenges, Vietnam has new and big opportunities and advantages for the attraction of foreign investment:

First, Vietnams economy continues to grow at a high, stable and sustainable rate. Particularly in 2006, its GDP increased over 8.17% and export turnover reached nearly USD 40 billion; the investment environment was constantly improved, reincreasing the FDI flow from 2004 and giving rise to a new wave of investment into the country, further creating an impetus for a high growth rate in the years to come.

Second, that Vietnam officially became a member of the WTO, successfully organized the 14th APEC Summit and was granted the status of permanent normal trade relations (PNTR) by the US parliament as well as successful bilateral and multilateral working trips of its high-ranking state leaders have helped raise its prestige in the international arena.

Third, the countrys market economy institutions have been increasingly formulated and perfected. Particularly, the system of laws and policies related to the investment and business environment has seen important improvements, creating an equal, more transparent and favorable legal environment for domestic and foreign investors to do business fruitfully in Vietnam.

Fourth, Vietnam has a stable political situation and maintains social order and safety; is a developing potential market with a population of over 80 million, which will rise to 100 million in the near future. It is also a favorable commercial gateway to the markets of many ASEAN member countries. Meanwhile, the worlds economic environment continues its positive development trend. Big world economic centers have overcome depression and moved into a period of stabilization or continue developing vigorously and all strongly promote offshore investment activities.

These factors are important for the creation of new opportunities and advantages to boost the attraction of investment into Vietnam. However, to make full use of opportunities, efforts should be concentrated on overcoming investment-related limitations in the enforcement of laws and policies, the quality of infrastructure and human resources, the promotion of investment and administrative procedures, and handling corruption and negative practices.

I. MAJOR SOLUTIONS

In order to take advantage of new opportunities and increase foreign investment in the spirit of the Resolution of the Xth National Party Congress, the Prime Minister requests ministries, branches and provincial-level Peoples Committees to urgently implement the following major solutions and specific tasks:

1. Planning work

a/ To speed up the formulation and approval of required plannings; to review for regular supplementation or adjustment of inappropriate plannings so as to facilitate investors identification and formulation of projects.

b/ To firmly grasp and consistently implement the Investment Laws new provisions on planning, ensuring that branch, sector and product-based plannings conform with international commitments.

c/ To finalize and publicize land use plannings to accelerate the process of ground clearance for investment projects.

2. Elaboration and enforcement of laws and policies

a/ To promulgate more normative legal documents guiding investment and business laws; review laws and policies, revise or abrogate incentives or subsidies which are inconsistent with WTO regulations or international commitments while applying solutions to ensure investors interests; to enhance the training in and dissemination of the contents and roadmap of implementation of Vietnams commitments; to offer investment incentives for projects on the construction of welfare works for laborers in industrial parks, export processing zones, hi-tech parks or economic zones in accordance with current laws.

b/ To monitor and oversee the enforcement of the investment law in order to promptly identify and handle arising problems; to end the promulgation and application of investment incentives and supports in contravention of law.

3. Investment promotion

a/ To finalize and announce a list of national projects calling for foreign investment in the 2006-2010 period, with orientations towards 2020; to work out investment mobilization programs targeted at key regions and potential transnational groups; attach importance to subsidiary industries in some branches (manufacturing, assembly, textile and garment and leather footwear) and socio-economic infrastructure; to continue reviewing and updating the list of projects calling for investment based on branch and local development requirements and plannings.

b/ To promulgate a regulation on formulation and implementation of the 2007-2010 national investment promotion program so as to ensure funds for investment promotion combined with trade and tourism promotion; to expeditiously adjust objectives, mechanisms and operational organization of the export assistance fund (set up under the Prime Ministers Decision No. 195/1999/QD-TTg of September 27, 1999) in accordance with the WTO principles and current law. To boost the promotion and popularization of the image of Vietnam, associate working trips of high-ranking Party and State leaders with investment promotion activities; to well organize investment promotion conferences at home and abroad; to raise the quality of investment promotion documents and the foreign investment website. To well organize Vietnamese days overseas.

c/ To increase investment mobilization delegations working directly with big conglomerates in some key foreign regions in order to call for investment in large important projects. To take the initiative in approaching and effectively assisting potential investors that wish to invest in Vietnam.

d/ To soon open investment promotion offices in some key foreign regions. To work out a regulation to ensure close coordination between investment promotion, trade promotion and tourism promotion agencies at all levels, at home and abroad so as to coordinate and improve their activities.

4. Overcoming of infrastructure weaknesses

a/ To revise, adjust, approve and announce infrastructural plannings toward 2020 as a basis for the attraction of investment in infrastructure development; to enhance the formulation and implementation of plannings on traffic and energy-works, and the attraction of investment in these works.

b/ To make full use of investment resources for infrastructure development, especially non-state budget capital, with priority given to water supply and drainage, environmental sanitation (solid waste and wastewater treatment) and the system of expressways, first of all the North-South route and two Vietnam-China economic corridors; to raise the quality of railway services, first of all the North-South expressway and the railway crossing two Vietnam-China economic corridors, the railway linking big mineral mines with the national railway system, the municipal railways of Hanoi and Ho Chi Minh City.

c/ To step up the study and formulation of policies to encourage the production and use of magneto-electricity and new types of energy (wind, tide or solar energy); in the near future, to ensure adequate electricity for production.

d/ To urgently formulate and promulgate mechanisms to encourage non-state economic sectors to participate in the development of infrastructures, including traffic works, seaports and independent power plants.

dd/ To expand forms of leasing out seaports and increase the categories of subjects allowed to invest in seaport services, particularly logistic services, so as to raise the competitiveness of Vietnams seaport system; to call for investment in large seaports such as Hiep Phuoc-Thi Vai, Lach Huyen, Van Phong, etc.

e/ To consider for promulgation a number of solutions to open earlier than committed the market of a number of services which the country needs.

g/ To enhance the attraction of investment in infrastructures in national tourist sites which are regionally and internationally competitive.

5. Labor and wage

a/ To quickly develop while raising the quality and efficiency of elementary, intermediate and collegial vocational training; to meet the enterprises demand for technical workers; to make investment in the development of 40 high-quality vocational training schools, including some international-standard ones.

b/ In order to prevent unlawful strikes and make labor relations healthy in the spirit of the Labor Code, to enhance the following measures:

Continuing to adapt laws and policies on labor and wage to the new situation; enhancing the inspection and supervision of labor users observance of labor law in ensuring working and living conditions for laborers;

Conducting propaganda and education in order to raise knowledge about labor law for laborers and labor users in foreign-invested enterprises, ensuring full and strict implementation of policies and laws on labor and wage.

c/ To set a common minimum wage level for laborers in enterprises of all economic sectors, taking into account the factors of inflation, investment regions and regulations on the minimum living conditions of Vietnamese people.

6. Administrative reform

a/ To well decentralize the management of foreign investment, especially in investment approval, grant of investment certificates and management of foreign investment projects, in combination with enhancement of effective cooperation and coordination in the inspection and supervision of the enforcement of the investment law. To resolutely and promptly solve problems in the process of granting and modifying investment certificates.

b/ To improve the capability of cadres and civil servants to fulfill the tasks prescribed in the Investment Law and new regulations on the decentralization of foreign investment management.

c/ To simplify and publicize foreign investment-related administrative processes and procedures, apply the one-stop shop mechanism to processing investment dossiers. To ensure uniform processes and procedures applied in localities to suit specific conditions.

d/ To enhance coordination in foreign investment management between central and local agencies and between relevant ministries and branches.

e/ To set up hotlines in state management agencies in charge of investment at all levels so as to promptly know and solve problems of investors and handle acts of harassing them.

7. Other solutions

a/ To continue raising the effectiveness of the prevention and combat of corruption, negative practices and harassment of investors. To raise the sense of individual responsibility in job performance, thrift practice and waste combat in state management agencies. At the same time, to enhance education, inspection and supervision work and strictly handle acts of corruption or harassment of investors at state management agencies at all levels.

b/ To boost the socialization of education, healthcare, culture and physical training and sport.

c/ To continue effectively implementing the phase-II Program of Action on Vietnam-Japan Joint Initiative in an effort to improve Vietnams investment and business environment and competitiveness.

II. ORGANIZATION OF IMPLEMENTATION

In order to implement the above groups of solutions, the Prime Minister requests ministries, branches and provincial-level Peoples Committees to perform the following specific tasks:

1. The Ministry of Planning and Investment

a/ To assume the prime responsibility for, and coordinate with other ministries and branches in, finalizing and submitting to the Government for promulgation decrees guiding the implementation of the Enterprise Law and the Investment Law which are still needed; to identify problems in the course of implementation of the Enterprise Law and the Investment Law. To promulgate in the third quarter of 2007 legal documents detailing the implementation of a number of provisions of decrees guiding the implementation of the Enterprise Law and the Investment Law.

b/ To assume the prime responsibility for, and coordinate with the Ministry of Science and Technology, the Ministry of Finance and concerned ministries, branches and localities in, working with functional agencies of the Japanese government and Japanese economic groups in order to accelerate investment in the development of infrastructures in Hoa Lac Hi-Tech Park.

c/ To assume the prime responsibility for, and coordinate with the Ministry of Transport, the Ministry of Finance and concerned ministries and branches in, working with functional agencies of the Japanese government on the North-South expressway project and the North-South high-speed railway project, and report them to the Prime Minister in the third quarter of 2007.

d/ To assume the prime responsibility for, and coordinate with concerned ministries and branches in, quickly setting up foreign investment promotion offices in some key regions, based on the Prime Ministers conclusions in Notice No. 103/TB-VPCP of May 9, 2007, on the scheme on strengthening foreign investment promotion offices in some key regions.

dd/ To assume the prime responsibility for, and coordinate with other ministries, branches and provincial-level Peoples Committees in, organizing investment mobilization campaigns targeted at key regions, big partners and groups and important projects. To implement the national investment promotion program in order to enhance the effective coordination of investment promotion activities.

e/ To act as the major agency in coordinating with ministries and branches in implementing the Vietnam-Japan Joint Initiative Action Program, the second stage, contributing to improving Vietnams investment and business environment and strengthening its competitiveness, and report to the Prime Minister thereon in the fourth quarter of 2007.

g/ To assume the prime responsibility for, and coordinate with ministries, branches and provincial-level Peoples Committees in, establishing a national network of information on foreign investment in order to promptly supply and gather information on investment.

h/ To assume the prime responsibility for, and coordinate with other ministries, branches and provincial-level Peoples Committees in, setting up an investment hotline in order to promptly know and solve investors problems and troubles.

i/ To assume the prime responsibility for, and coordinate with the Ministry of Finance and the Ministry of Science and Technology in, submitting to the Prime Minister in the third quarter of 2007 investment incentives for hi-tech projects outside hi-tech parks.

k/ To assume the prime responsibility for, and coordinate with concerned ministries and branches in, setting up teams to assist large investment projects right from their start so as to accelerate the process of formulation and execution of investment projects in Vietnam.

2. The Ministry of Finance

a/ To expeditiously adjust the objectives, mechanisms and operational organization of the Export Assistance Fund set up under the Prime Ministers Decision No. 195/1999/QD-TTg of September 27, 1999, in compliance with the WTO principles and current law, and rename the Fund as the Trade-Investment-Tourism Promotion Fund, to report to the Government thereon in the second quarter of 2007.

b/ To assume the prime responsibility in formulating incentives and management mechanisms for indirect investment and investment from foreign investment funds into Vietnam, to submit them to the Prime Minister in the third quarter of 2007.

c/ To assume the prime responsibility for, and coordinate with the Ministry of Natural Resources and Environment in, proposing forms of environmental subsidies in accordance with the WTO Agreement on Subsidies and Countervailing Measures (SCM).

d/ To assume the prime responsibility for, and coordinate with concerned ministries and branches in, reviewing and amending inappropriate regulations on transaction costs in goods transport and customs procedures, and submit them to the Prime Minister in the third quarter of 2007.

3. The Ministry of Industry

a/ To work out a scheme on electricity supply and measures to cope with different extents of electricity scarcity; to elaborate plans to prioritize the supply of electricity for production, especially in localities where many production enterprises are based, and for the development of important industries and services in key areas, and report to the Prime Minister thereon in the third quarter of 2007.

b/ To expeditiously implement the roadmap on commercialization of the power industry, formulate a mechanism and framework for the determination of energy (coal, gas, electricity) prices, and submit them to the Government for approval and promulgation in the fourth quarter of 2007.

c/ To assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment in, drawing up a list of power source and energy projects calling for foreign investment in various forms; to outline the projects and mobilize investment for them.

d/ To assume the prime responsibility for, and coordinate with concerned ministries and branches in, studying and working out solutions to production and use of magneto-electricity and new types of energy such as wind, tide or solar energy, and submit them to the Government in the fourth quarter of 2007.

dd/ To assume the prime responsibility for, and coordinate with the Ministry of Natural Resources and Environment in, reporting to the Prime Minister on the assessment of industrial waste in the fourth quarter of 2007.

e/ To assume the prime responsibility for, and coordinate with the Ministry of Natural Resources and Environment in, studying measures for sustainable environmental development in accordance with the 2005 Environmental Protection Law, and submit them to the Prime Minister in the fourth quarter of 2007.

4. The Ministry of Labor, War Invalids and Social Affairs

a/ To expeditiously finalize and submit to the Government in the fourth quarter of 2007 for promulgation a decree guiding the implementation of the Law Amending and Supplementing a Number of Articles of the Labor Code and a decree guiding the implementation of the Law on Vocational Training.

b/ To work out and submit to the Government a roadmap for the application of a common policy on the minimum wage level to laborers in enterprises of all economic sectors, including laborers working for foreign contractors, taking into account such factors as inflation, geographical areas and regulations on the minimum living standards of Vietnamese people.

c/ To quickly develop the size while raising the quality and efficiency of vocational training schools of three levels (elementary, intermediate and collegial), meeting the enterprises demand for technical workers; to make concentrated investment in the development of 40 high-quality vocational training schools, including a number of international-standard schools.

d/ To assume the prime responsibility for, and coordinate with the Ministry of Education and Training and concerned ministries and branches in, studying and renewing vocational training programs to meet the demands of the labor market, including the labor demand of foreign-invested enterprises, so as to better satisfy the demand for human resources.

5. The Ministry of Natural Resources and Environment

a/ To work out a scheme on strengthening the environmental protection capacity of enterprises and submit it to the Prime Minister in the third quarter of 2007.

b/ To assume the prime responsibility for, and coordinate with concerned ministries and branches in, reviewing and amending regulations on land-related investment incentives, and submit it to the Government in the second quarter of 2007.

c/ To work out a scheme on the development of environmental services in accordance with WTO regulations, which serve as a basis for the attraction of foreign investment in environmental treatment and environmental services, and submit it to the Prime Minister in the second quarter of 2007.

d/ To assume the prime responsibility for, and coordinate with the Ministry of Finance and the Ministry of Industry in, studying and formulating incentives for enterprises environmental protection activities.

dd/ To establish environmental protection partnerships between environmental management agencies, foreign enterprise associations, enterprises and communities.

6. The Ministry of Post and Telematics

To assume the prime responsibility for, and coordinate with concerned ministries and brandies in, submitting to the Prime Minister in the third quarter of 2007 a scheme on opening the post and telecommunications market to foreign investors in accordance with WTO regulations and international commitments.

7. The Ministry of Education and Training

a/ To formulate a planning on the network :of universities and colleges, serving as a basis for the attraction of foreign investment in education and training, placing emphasis on the socialization of education and training activities and the enhancement of enterprises self-training capability, and submit it to the Prime Minister in the third quarter of 2007.

b/ To assume the prime responsibility for, and coordinate with other ministries and branches in, formulating a scheme on human resource training to meet the development requirements, and submit it to the Prime Minister in the fourth quarter of 2007.

c/ To review and propose amendments to the Governments Decree No. 06/2000/ND-CP of March 6, 2000, on the promotion of foreign investment in education and training and Decree No. 18/2001/ND-CP of May 4, 2001, on the establishment and operation of foreign cultural and educational institutions in Vietnam in line with the investment law and international integration trend.

8. The Ministry of Health

a/ To submit in the second quarter of 2007 to the Prime Minister for approval a planning on development of the medical examination and treatment and functional rehabilitation network and a planning on the preventive medicine network.

b/ To further finalize the scheme on development of the pharmaceutical industry, and submit it to the Prime Minister in the third quarter of 2007.

c/ To draft the Pharmacy Law and a scheme on development of the medical equipment industry, and submit them to the Prime Minister in the fourth quarter of 2007.

9. The Ministry of Culture and Information

To assume the prime responsibility for, and coordinate with concerned ministries and branches in, drawing up and submitting to the Government in the third quarter of 2007 for promulgation a list of culture and information domains in which investment is banned or conditional in accordance with international commitments.

10. The Ministry of Trade

To assume the prime responsibility for disseminating and popularizing to localities, domestic and foreign investors and enterprises the market-opening roadmap related to the conditional investment domains in accordance with Vietnams concluded international commitments.

11. The Ministry of Justice

Based on its functions and tasks and current legal provisions, to inspect and scrutinize the promulgation and guidance of the implementation of normative legal documents related to investment domains so as to ensure fruitful investment activities.

12. The State Bank of Vietnam

To promulgate legal documents guiding foreign credit institutions to purchase shares of Vietnamese commercial banks.

13. The Ministry of Foreign Affairs

a/ To closely coordinate with the Ministry of Planning and Investment in setting up and managing activities of investment promotion offices in some key regions.

b/ To coordinate with concerned ministries and branches in elaborating a national publicity program on Vietnamese days overseas for the 2007-2010 period.

14. The Ministry of Home Affairs

a/ To assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment and provincial-level Peoples Committees in, formulating a scheme on consolidation of the organization and apparatus of investment management and business registration agencies in accordance with new provisions of the Investment Law and the Enterprise Law, and submit it to the Government in 2007.

b/ To assume the prime responsibility for, and coordinate with concerned ministries and branches in, elaborating and submitting to the Government in 2007 for promulgation legal documents guiding the implementation of the Anti-Corruption Law regarding responsibilities of heads of state agencies and cadres and civil servants.

15. The Ministry of Transport

To assume the prime responsibility for, and coordinate with other ministries, branches and localities in, reviewing specialized plannings on Vietnams road, highway and seaport systems, and submit them to the Prime Minister in 2007.

16. The Ministry of Construction

To assume the prime responsibility for, and coordinate with the Ministry of Natural Resources and Environment in, reporting to the Prime Minister in the third quarter of 2001 on a planning on the construction of industrial solid waste and hazardous waste treatment areas, especially in key economic zones.

17. The Ministry of Science and Technology

To expeditiously finalize the draft decree guiding the implementation of the Law on Technology Transfer and the draft decree detailing and guiding investment cooperation with foreign countries in scientific and technological activities, and submit them to the Government for promulgation in the third quarter of 2007.

18. The Vietnam National Administration of Tourism

To assume the prime responsibility for, and coordinate with concerned ministries, branches and localities in, formulating a scheme on the attraction of investment in tourism in order to create national tourist sites of large size and high quality which are regionally and internationally competitive, and submit it to the Prime Minister in the fourth quarter of 2007.

19. Responsibilities of ministries, branches and provincial-level Peoples Committees

a/ Ministries, branches and provincial-level Peoples Committees shall fully perform their function of state management of foreign investment according to investment and specialized laws. At the same time, they shall coordinate closely with relevant agencies in implementing the solutions in this Directive.

b/ Ministries, ministerial-level agencies and provincial-level Peoples Committees shall review investment and business conditions; promptly cancel or propose for cancellation inappropriate conditions. They, at the same time, may not impose additional investment or business conditions or other conditional investment and business lines.

c/ To decentralize the state management of foreign investment activities and enhance coordination between ministries, branches and provincial-level Peoples Committees in this work.

d/ Ministries, ministerial-level agencies and provincial-level Peoples Committees shall focus on directing the implementation of the Governments Resolution No. 05/2005/NQ-CP on enhancing the socialization of educational, medical, cultural and physical training and sport activities. Particularly, they shall quickly finalize financial and investment mechanisms and land and infrastructure policies in order to attract all investment resources in the educational, medical, cultural, physical training and sport domains.

dd/ To continue reforming and streamlining administrative procedures. To raise the effectiveness of the combat against corruption and harassment of investors; to practice thrift, combat waste, and inspect, supervise and strictly handle acts of corruption of cadres and civil servants at all management levels.

e/ To enhance the communication and management of investment data and stringently observe the regime of reporting on foreign investment in accordance with the investment law.

g/ Provincial-level Peoples Committees shall promulgate mechanisms of coordination between services, departments and branches in investment and business domains and publicize investment and business procedures.

h/ To continue reviewing and adopting plans to well implement agreements in the Vietnam-Japan Joint Initiative Action Program, the second stage, contributing to improving Vietnams investment and business environment and strengthening its competitiveness.

The Ministry of Planning and Investment shall monitor, urge, inspect, review and report to the Prime Minister on the implementation of this Directive.

Ministers, heads of ministerial-level agencies, heads of government-attached agencies and presidents of provincial-level Peoples Committees shall well organize the implementation of this Directive and report the implementation results to the Ministry of Planning and Investment in the first quarter of 2008 at the latest for summing up and reporting to the Prime Minister.

Problems arising beyond their competence should be reported to the Prime Minister for consideration and direction.