The list of conditional business lines is the biggest obstacle of the Law on Investment 2020?

In the course of efforts to integrate into the global economy, the Law on Investment 2020 is expected to be a major step forward to simplify procedures, promote business freedom and attract foreign investment (FDI). This law, which came into effect on January 1, 2021, has brought many positive reforms, such as cutting some conditional business lines, strengthening the decentralization of authority, and special investment support. However, after nearly 5 years of implementation, it has been shown that regulations on conditional business lines are still the biggest "bottleneck", hindering the business environment, reducing Vietnam's competitiveness compared to other countries in the ASEAN region.

From the implementation practice of the Law on Investment 2020

The Investment Law 2020 was enacted in the context of a challenging global economy, from the Covid-19 pandemic to US-China trade tensions and global climate change. The period 2020-2025 also witnessed a decline in global economic growth. Domestically, the Party and the Government have directed drastically in improving institutions, promoting the private economy, digital economy and innovation. In a short time, with many great changes, the Law on Investment 2020, although it has been changed many times, still shows its limitations and shortcomings in the new context. Therefore, the Ministry of Finance is submitting a draft of the Law on Investment, a new draft to comprehensively amend the Law on Investment 2020[1].

When it was born, the main goal of the Law on Investment 2020 was to improve the quality of investment attraction, ensuring the right to freedom of business according to the principle of "people and businesses are free to do business in industries not prohibited by law". The Law has reduced the list of conditional business lines from 267 in the Law on Investment 2014 to 227 industries, and at the same time cut capital requirements, in accordance with business planning and plans. Through three amendments from Law No. 03/2022/QH15 (2022), 57/2024/QH15 (2024) and 90/2025/QH15 (2025), the Law on Investment 2020 has continued to be improved, as well as supplemented incentives for green investment and decentralized authority to provincial People's Committees in accordance with the requirements at each time. However, through practice, it has been shown that regulations on conditional business lines have not been thoroughly reformed, leading to many inadequacies, slowing down investment progress and increasing compliance costs for businesses.

Challenges from the list of conditional business lines

Although the number of conditional business lines specified in the Law on Investment 2020 has decreased compared to the previous Law on Investment, the quality of reform is not high, leading to "insubstantial reduction". The actual number is larger than 227 because some industries are merged or expanded in scope, while specialized laws still provide for additional conditions. This makes doing business in Vietnam still face a lot of difficulties even though the number of industries and trades according to regulations has decreased. The cause of this condition can be seen from the following reasons.

Firstly, lack of proactive review and abuse of criteria

According to Clause 7, Article 7 of the Law on Investment 2020 and Clause 1, Article 12 of Decree 31/2021/ND-CP, ministries and sectors must periodically review, propose to abolish or amend business conditions. However, many ministries and branches only implement it when there is a direction from the Government, leading to delays in reviewing, adjusting or abolishing it. The criteria "national defense, national security, social order, safety, social ethics, public health" are abused without specific risk analysis. Many industries were included in the list even though they did not see any risks in the previous implementation process. For example, the "accounting service business" industry is included in the list from the Accounting Law 2014, although before that, economic organizations conducted business as usual and did not record any risks. Similarly, "business in customs clearance services" or "tax procedures" only affects private relations, does not need to be controlled by business conditions. But then, in the Law on Investment 2020, these industries and trades are all on the list of conditional business lines and lines.

Secondly, the supervision mechanism is ineffective and the number of industries actually increases

Although the Government makes efforts to eliminate unreasonable conditions, there is a lack of specific measurement indicators, leading to reforms that do not meet the expectations of the business community. List IV of the Investment Law 2020 is almost only a formality, because specialized laws still maintain more conditional business lines than this list. For example, the number of industries excluded from the list of the Law on Investment 2020 but the guiding decrees are still in effect, causing overlap, confusion and difficulty to implement in practice. Moreover, through the revisions, the number in some fields has increased due to the merger of names but the expansion of the content, such as from "Breeding and raising common wild animals" to "Raising common forest animals", or expanding "Business of aquatic feed testing services" to include animal feed.

Thirdly, mainly applying pre-inspection, restricting business freedom

The majority of 227 industries require licensing before doing business, creating barriers to market entry. The report mentions that many industries can switch to post-inspection by technical regulations, such as "Business in the service of building, converting, repairing and restoring inland waterway vehicles" or "manufacturing helmets". Maintaining pre-checks leads to "formal licensing but insubstantial operations", increasing costs and time for small businesses. This has been mentioned many times by businesses as well as the community of foreign-invested enterprises in Vietnam and asked Vietnam to change its approach.

Fourth, business conditions are excessive, general and deeply intervened

Many conditions require the ownership of vehicles and machinery; the license term is short; or compulsory training organized by state agencies, creating barriers to competition. Vague regulations such as "must be appropriate", "must be healthy", "qualified" lead to confusion in appraisal. Some interference with autonomy, such as the mandatory establishment of a specific type of business or the use of certain technologies, adversely affects small and medium-sized enterprises. For example, the industry "Business of animal testing and surgery services" is not consistent with the Law on Animal Health, causing difficulties for investors.

Pandora Vietnam Factory. Source: CafeF

Fifth, negative impacts on the investment environment

Recent reports have also recorded 2,365 backlog projects due to legal problems[2], causing a huge waste of resources in national development. In the context of FDI declining quality due to the global minimum tax and fierce competition between countries around the world, the regulation of this conditional business line is also one of the factors that reduce Vietnam's attractiveness in the eyes of investors. Although UNCTAD (United Nations Conference on Trade and Development) assesses Vietnam as the top 20 to attract FDI[3], reforms are still needed to achieve the goal of Resolution 66-NQ/TW with the requirement to be in the top 3 ASEAN investment environment by 2028.

Impacts on businesses and the need for reform and innovation

This problem not only affects businesses but also the entire economy. For domestic enterprises, especially the private economy, business conditions increase compliance costs and reduce the ability to start innovative businesses. FDI enterprises face difficulties in expansion, such as electronics and semiconductor projects of Intel or Samsung, although Vietnam is forming a global semiconductor ecosystem.

Slowing down the progress of the project is contrary to the wishes of the Party and the State in arousing all potentials and resources for economic development. Moreover, in the context of the digital and green economy, outdated regulations that are not updated in time can hinder investment in high technology and innovation.

With this proposal to comprehensively amend the Law on Investment, the Ministry of Finance hopes that the new Law on Investment only stipulates the principle of determining conditional business lines, assigns the Government to prescribe a list of conditional business lines for convenience and flexibility in adjusting in accordance with new requirements from time to time. In addition, the new Draft Law on Investment also requires specialized laws not to stipulate additional conditions to ensure uniformity. In addition, the Government reviews and abolishes unnecessary industries, switching to post-inspection, such as accounting services, customs, and shipbuilding. At the same time, it is necessary to supplement an effective supervision mechanism, with specific indicators to measure reform with the desire to create the most favorable conditions for legal investment activities of foreign investors in Vietnam in the coming time.

Regulations on conditional business lines in the Law on Investment 2020, although improved, are still the biggest obstacle, causing overlap, cumbersome and restricting business freedom. It is clear that it is necessary to comprehensively and thoroughly revise this list of industries and professions to suit the "new era" of the nation, as emphasized in Resolution 66-NQ/TW. Only by thoroughly solving this "bottleneck" will Vietnam truly become an attractive destination for investment, contributing to achieving the growth target of 8% in 2025 and sustainable development by 2030.