From July 1, 2025, Vietnam will officially operate the two-level local government model and implement the merger of administrative units, opening up expectations for procedural reform, streamlining the apparatus and creating new space for economic development and attracting foreign investment. However, in the process of actual implementation, many foreign direct tnvestment enterprises (FDI) have been encountering many problems related to investment incentive policies, administrative procedures, management decentralization as well as the obligation to update and adjust legal documents according to new administrative boundaries. In the seminar broadcast on the Economic Channel of Ho Chi Minh City Radio and Television (HTV), Managing Partner Nguyen Van Phuc, representative of HM&P Law Firm (“HM&P”), specifically analyzed the difficulties and legal challenges posed to FDI enterprises after the merger; at the same time, make recommendations to contribute to improving the efficiency of attracting and retaining FDI inflows in the new period.
Ho Chi Minh City is currently seeking public opinion on the merger of Binh Duong and Ba Ria - Vung Tau provinces. Source: Thanh Nien
Institutional and policy differences before the merger
Speaking at the program, Lawyer Phuc said that during the process of attracting foreign investment, each locality in Vietnam has formed its own development orientations and preferential policies in accordance with the socio-economic conditions, planning and comparative advantages of each region.
Practice shows that some localities prioritize attracting investment in the fields of high technology, innovation and energy; some localities focus on preferential policies on land, infrastructure or industrial development, logistics and services. These differences have created investment attraction in each specific area, but at the same time, they also pose significant challenges when merging administrative units. Lawyer Phuc said:
"It is the difference in preferential policies, governance models and the way the administrative apparatus is organized between localities before the merger is one of the reasons why FDI enterprises have difficulties in accessing, predicting and developing stable investment plans in the transition period."
Legal problems and practical difficulties of post-merger enterprises
After the merger of administrative units, FDI enterprises are facing many problems in reality.
One of the prominent problems is the lack of uniformity of investment incentive policies between localities before the merger. The change of administrative boundaries may give rise to differences in the way of determining the preferential areas, types of incentives and the duration of incentives, affecting the interests and long-term investment plans of FDI enterprises, in the context that investors attach special importance to the stability and predictability of policies.
In addition, the overlap in databases, dossier processing processes and management decentralization between post-merger agencies also make it difficult for businesses to identify the right competent authorities, prolong the time to carry out administrative procedures and increase compliance costs.
In addition, businesses also have problems in updating and adjusting relevant legal documents to suit the new administrative unit. In fact, the lack of synchronization between management systems, accounting software, e-invoices, as well as changes in the organizational structure of tax authorities and other specialized agencies, have caused many businesses to lose more time and resources in the process of operation affecting the progress and efficiency of business activities.
Source: Tuoi Tre
Recommendations to improve the efficiency of attracting and retaining FDI
From the above-mentioned practical problems, Lawyer Phuc said that in order to effectively implement the two-tier local government model and maintain the attractiveness of the investment environment, it is necessary to focus on some key solutions as follows:
- To complete and unify the legal framework on investment incentives, in which to review and synchronize regulations related to preferential areas, conditions and duration of enjoying post-merger incentives, in the direction of ensuring the stability of policies and interests of licensed projects.
- Standardize and digitize administrative procedures, through the consolidation of data between old localities, the construction of a shared database and the implementation of an interconnected "electronic one-stop" mechanism, in order to limit overlapping authority, shorten the time for processing documents and improve transparency.
- Reorganize the apparatus and clearly delineate the authority of specialized agencies according to the size and characteristics of the new administrative unit, helping enterprises clearly identify the focal point for receiving and handling procedures, thereby reducing compliance costs and "waiting" costs during project implementation.
According to Lawyer Phuc, the key point lies not only in the merger of administrative boundaries, but also in building a unified, stable and highly predictable legal framework, and standardizing administrative procedures on the basis of digital technology, thereby creating a transparent and sustainable investment environment for FDI enterprises.
The identification and timely handling of legal problems arising after the merger of administrative units is not only a compliance requirement for FDI enterprises, but also plays an important role in ensuring the stability of the investment environment and the efficiency of project implementation. With in-depth consulting experience in the field of investment and corporate law, HM&P is ready to accompany investors in identifying risks, complying with legal regulations and implementing investment activities effectively and sustainably in Vietnam.
Read more Part 1: Here
Read more Part 2: Here
Read more Part 3: Here
