A foreign joint venture is understood as an economic entity with at least one foreign company partner. Like all business formations, joint ventures have advantages and disadvantages.
On the positive side, a Vietnamese partner can contribute crucial relationships with government officials and clients, local market know-how, access to qualified staff, and knowledge of land-use rights. Vietnam Insider reports.
Sectors required local partner
In some business lines, where 100 percent foreign ownership is not allowed, a joint venture many be the only viable investment option, details as below:
- Advertising services
- Entertainment services
- Electronic game business
- Container handling services
- Customs clearance services
- Telecommunication services
- Travel agencies and tour operator services
- Services auxiliary to all modes of transport
- Services incidental to agriculture, hunting, and forestry
- Internal waterways transport, rail and road transport services
However, there are many potential challenges, including differences in management styles and organizational cultures, as well as fundamental differences in outlook and objectives among the partners.
According to Sophie Dao, Partner at GBS, an investment consulting firm in Vietnam, technology can be transferred by outright sale, licensing, or contribution as capital. Foreign joint ventures often contain technology transfer provisions. The Ministry of Science and Technology has primary authority to approve technology transfer contracts. Implementing regulations of the law governing technology transfer have made such deals difficult. The key areas to note are strict requirements for precise details on the timetable for the delivery of technology; provisions requiring extensive warranties; the limited duration of contracts; and restrictions on royalty rates.
Licensing
Despite recent improvements, licensing arrangements must contend with stringent regulations, long approval times and restrictions on dividend payments, limited contract duration, weak legal frameworks, and intellectual property rights problems. Nevertheless, there is considerable licensing of trademarks, technology, and after-sales service activities from overseas companies to affiliated joint ventures in Vietnam.
Procedures
In order to establish a joint venture tourism company in Vietnam, foreign investors should carry out the following procedures:
- Step 1: Select at least a Vietnamese individual or company to jointly register the foreign investment project in order to be granted the investment registration certificate.
- Step 2: Registration for establishment of Joint Venture Company in Vietnam
- Step 3: After meeting international business conditions, a joint venture company established must apply for a sub-license (if required) for doing business service in Vietnam.
To be advised in details or need a local business partner to set-up your joint venture in Vietnam, you should contact a law firm and GBS can be a good option.
By: Vietnam Insider