New regulations on foreign indirect investment in Vietnam drafted

The State Bank of Vietnam (SBV) is drafting a circular to better manage foreign investment protocols and hopefully make them speedier.

The new circular will regulate the opening and use of Vietnamese dong -denominated accounts for foreign investors, in order to conduct foreign indirect investment activities in Vietnam.

According to the SBV, to achieve the goal of upgrading and developing the Vietnamese stock market, the Prime Minister has assigned the SBV to preside over and coordinate with the Ministry of Finance, the State Securities Commission and relevant agencies to review and propose amendments and supplements to legal regulations. This should simplify procedures and shorten the time of opening indirect investment capital accounts for foreign investors to create favourable conditions for foreign investors when participating in the Vietnamese stock market.

Currently foreign exchange management for foreign indirect investment activities in Vietnam are regulated in Circular 05/2014/TT-NHNN issued in 2014. However, the circular is no longer appropriate as it was developed based on old laws. Specifically, the circular was based on the Investment Law in 2005, Securities Law 2006 and Law on Credit Institutions 2010, which have been replaced by the Investment Law 2020, the Securities Law 2019 and the Law on Credit Institutions 2024.

Therefore, the SBV said, it is necessary to develop a circular to replace Circular 05/2014/TT-NHNN to implement solutions to upgrade the Vietnamese stock market according to the Government's direction and to meet the requirements of foreign exchange management for foreign indirect investment activities in Vietnam currently.

The amended draft circular will simplify procedures for opening indirect investment accounts of foreign investors, regulate the opening of online indirect investment accounts and allow foreign investors to open many indirect investment accounts corresponding to their granted securities transaction codes.

According to the draft circular, foreign indirect investment activities in Vietnam are carried out in accordance with the provisions of the country’s laws on investment securities and other relevant laws.

All revenue and expenditure of transactions related to foreign indirect investment activities in Vietnam by foreign investors must be carried out through Vietnamese dong-denominated accounts, the draft circular states.

The balance in indirect investment accounts of a foreign investor cannot be transferred to term deposits and savings deposits.