[Q&A #3] What Is the Japan-Vietnam Investment Agreement, and Can It Be Invoked When Entering the Vietnamese Market?

The Japan-Vietnam Investment Agreement (the "Agreement") is a treaty signed by the Governments of Japan and Vietnam on November 14, 2003, and formally entering into force on December 19, 2004, providing for national treatment and most-favored-nation treatment. The Agreement governs the restrictions applicable when Japanese investors enter the Vietnamese market. Unlike Vietnam's WTO Commitments, which follow a positive-list approach, the Agreement adopts a negative-list approach — meaning that, in principle, a Japanese investor may invest in any business or sector that is not listed on the Agreement's negative list. In other words, even where a sector has not been opened up under Vietnam's WTO Commitments, a Japanese investor may in principle still be able to conduct that business in Vietnam provided it does not fall within the Agreement's negative list (where the sector qualifies as a conditional investment sector, the applicable conditions must be separately satisfied). In practice, however, the authorities are generally unaware of the Agreement's existence and in most cases apply only the WTO Commitments. Investors and their advisors likewise tend to lack sufficient knowledge of the Agreement and rarely take active steps to have it applied. For this reason, we recommend that Japanese investors — even where it requires additional time — engage in discussion with the Vietnamese authorities and make the case for applying the Agreement, which is more favorable than the WTO Commitments.