Business community calls for clearer criteria on investment project extensions

The ongoing review of Vietnam’s Investment Law aims to refine the legal framework, address operational bottlenecks, and cultivate a more frictionless environment for businesses. Central to these reforms are proposed amendments regarding the duration of investment projects.

Clarity needed on "large-scale, slow-payback" projects

Under the latest draft amendments to the Investment Law, investment projects operating outside economic zones will be capped at a maximum lifespan of 50 years. However, projects situated in regions with difficult socio-economic conditions or those requiring significant capital outlay with long pay-back periods, may be granted an extended term of up to 70 years.

The Vietnam Chamber of Commerce and Industry (VCCI) welcomed the proposal, noting that it provides crucial leeway for capital-intensive ventures with protracted returns. However, current regulations lack definitive criteria to determine what constitutes a project with "large investment capital and slow capital recovery". This ambiguity, VCCI warned, risks leaving both investors and regulatory authorities in limbo when determining project durations.

Given that capital scale and payback periods vary significantly depending on the sector, scale, and local economic conditions, VCCI recommended delegating authority to the Chairmans of provincial and municipal People’s Committees to establish localized, clear-cut criteria.

Establishing precise metrics would ensure greater transparency during project appraisals and better align with regional realities, according to the VCCI.

Unlocking bottlenecks in foreign-to-domestic transfers

VCCI also highlighted the need to overhaul extension mechanisms for projects originally funded by foreign entities but subsequently transferred to domestic firms.

In practice, particularly within the real estate sector, foreign investors frequently initiate projects before selling all or part of their stake to local entities. Once transferred, these projects fall under the stewardship of domestic investors.

Under current regulations, however, projects subject to non-compensated asset transfers to the Vietnamese State or a domestic counterparty are ineligible for operational extensions. VCCI argues that this sweeping rule inadvertently traps local investors who acquire such assets in a legal deadlock when applying for extensions.

To resolve this, VCCI proposed a dedicated mechanism for domestic entities acquiring whole or partial stakes from foreign investors bound by non-compensation transfer terms. Under the proposed framework, the project lifespan would be reset based on standard regulations from the exact date of transfer, exempting the local acquirer from non-compensated transfer obligations.

This reform would help liquidate long-standing backlogs of stalled projects and better reflect the legislative intent of enabling project extensions for committed investors.

Certainty is key to long-term investment

Concurring with VCCI, Associate Professor Dr Ngo Tri Long, an economic expert from the Vietnam Association of Financial Consultants, stressed that project duration directly dictates investment decisions. Lifespans are fundamentally linked to capital-raising strategies, asset depreciation, and overall return-on-investment timelines.

While extending maximum project lifespans to 70 years is a welcome move, its practical efficacy hinges on clear, predictable rules that allow businesses to model risks during the pre-investment phase. Qualitative or vague criteria leave room for subjective interpretation by approving authorities.

Similarly, legal mechanisms for project transfers must reflect the commercial reality of who is currently operating the project. Clarifying these rules will remove friction during extension applications and deliver much-needed stability for long-term investment cycles.