When seeking to expand business operations in the Vietnamese market, FDI enterprises often pursue entry through investment projects. However, faced with a “matrix” of project investment structures ranging from direct investment, joint ventures, to public–private partnerships (PPP) or indirect investment via funds, many managers and investors find themselves uncertain. If you are encountering this issue, it is important to understand that what you need is a clear roadmap, rather than merely a theoretical classification. In this article, KMC will provide a comprehensive overview to support FDI enterprises in making well-informed decisions.
What Is Project Investment?
Project investment is a specific form of investment in which the investor (FDI) allocates capital, resources, and managerial capacity to implement a project with clearly defined objectives, scope, timeline, and budget.
For FDI enterprises, an investment project may include:
● Projects for the construction of factories, new production facilities, or expansion.
● Projects for the development of industrial park infrastructure and leaseable factories.
● Energy projects and real estate projects with clearly planned scale and implementation schedules.
● Public–private partnership (PPP) projects in key sectors.
Forms of Project Investment
Pursuant to Article 21 of the Law on Investment 2020, foreign investors, including Japanese enterprises, may select one of the following principal investment forms:
Investment through Establishment of an Economic Organization
This is a common form, allowing FDI enterprises to establish an independent legal entity such as a limited liability company or a joint-stock company.
Legal characteristics: Foreign investors are required to have an investment project and must carry out procedures for obtaining an Investment Registration Certificate prior to the establishment of the enterprise. In addition, compliance with market access conditions (List of restricted business lines) is required.
Advantages for FDI enterprises: This form provides a clear market presence, brand independence, and full control over operations. It is suitable for long-term projects.
Capital Contribution, Share Acquisition, and Capital Interest Acquisition (M&A)
This form allows foreign investors to enter the Vietnamese market by acquiring partial or full ownership in an existing enterprise.
However, capital contribution or acquisition transactions must satisfy market access conditions, as well as regulations on national defense and security, and land laws.
M&A enables FDI enterprises to access the market quickly, inherit an existing customer base, workforce, and distribution system, thereby minimizing risks and reducing the time required to build operations from scratch.
Note: It is necessary to conduct thorough legal due diligence on the target enterprise, particularly in relation to assets, land use rights, and labor matters.
Investment in the Form of Business Cooperation Contract (BCC)
A BCC is a contractual arrangement between investors to jointly conduct business activities and share profits or products without establishing a new legal entity.
Legal characteristics: The parties establish a coordination board. A BCC involving foreign investors must be granted an Investment Registration Certificate.
For FDI enterprises, the advantages of this form include high flexibility and suitability for projects in natural resource exploitation, infrastructure development, or technology cooperation and research. It allows for the combination of domestic partners’ strengths (such as market knowledge and local relationships) with foreign partners’ technology, capital, and management expertise.
Note: The parties should draft a detailed and comprehensive contract to clearly define rights, obligations, responsibilities, and dispute resolution mechanisms among the parties.
Implementation of Investment Projects
This refers to a form whereby investors enter into contracts with competent state authorities to implement Build–Operate–Transfer (BOT), Build–Transfer–Operate (BTO), Build–Transfer (BT) projects, and public–private partnership (PPP) investment projects.
Characteristics: This form is typically applied to large-scale infrastructure and energy projects. It provides opportunities to participate in key government projects with clearly defined risk-sharing and profit-sharing mechanisms.
Risk and Return Assessment Table for Project Investment Forms
| Investment Form | Profit Potential | Level of Risk and Challenges | Suitability for FDI Enterprises |
| Establishment of an Economic Organization (100% Foreign-Owned Company) | Profit: high, entitled to full after-tax profit. Absolute control over strategy, governance, technology, and operations. Proactive application of corporate culture and standards of the foreign parent company. Incentives: may be entitled to full investment incentives by industry and location. | High legal and administrative risks in the initial stage due to requirements for Investment Registration Certificate, Enterprise Registration, and sub-licenses. In addition, it is necessary to comply with market access conditions (Appendix IV of the Investment Law). Market risk: bears full business risk and must independently establish customer and supplier networks. High cost and time as the organizational structure must be built from scratch. | Suitable for large multinational corporations with strong financial and operational capacity, aiming to protect proprietary technology and implement a standardized governance model. |
| Capital Contribution, Share Purchase, and Capital Contribution Acquisition (M&A) | Profit: entitlement to profit distributed in proportion to contributed capital. May gain fast market access and leverage existing advantages of the target enterprise. Corresponding to ownership ratio, investors may participate in management or supervision depending on agreement. This form is flexible, enables rapid market entry, and has relatively low initial barriers in certain sectors. | Very high counterparty risk due to differences in business culture and non-aligned governance standards, potentially leading to conflicts of interest. Requires thorough legal due diligence on the target enterprise, especially foreign ownership restrictions by industry. Integration risk: difficulty in applying new technical standards and internal control procedures to existing operations. | Suitable for investment funds or enterprises seeking strategic cooperation with reputable Vietnamese partners. |
| Investment Project Implementation under Business Cooperation Contract (BCC) | Profit: sharing of profit/products according to agreed ratio, not dependent on establishment of a new legal entity. High flexibility, allowing parties to combine strengths (e.g., Vietnamese party provides land and licenses; Japanese party provides technology and capital). Lower initial legal risk compared to establishment of a new entity. | Very high contractual risk. BCC agreements are complex and must clearly define capital contribution, profit allocation, management authority, and dispute resolution mechanisms. Project management risk: coordination board may lack strong legal enforceability, leading to operational disputes. Legal risk: assets formed under the contract are jointly owned, which may create complexity upon termination. | Suitable for specific, time-bound projects such as natural resource exploitation, infrastructure development, and product R&D. Requires an experienced legal and tax advisory team to prepare detailed and well-structured contracts. |
Which of the above project investment forms would you choose? Regardless of your choice, please remember the following principles for successful investment: conduct thorough market research, diversify your investment portfolio, and always seek Business Advisory from organizations that have in-depth understanding of both Vietnamese legal regulations and the parent company’s business culture, such as KMC.
