$235 billion in limbo nationwide

There is a sense of sorrow and helplessness upon learning that 2,200 projects - worth nearly 6 quadrillion VND (approximately $235 billion) - along with more than 300,000 hectares of land, are stalled across the country.

While full details are unavailable regarding how many of these projects are public investment, FDI, or private ventures, given the government’s recent strong push for public investment, it's likely that the majority of these stalled projects are private.

The good news is that the government has completed a review of these projects, and Prime Minister Pham Minh Chinh is now proposing that the Politburo and National Assembly take action to remove the roadblocks, as he recently stated before the legislature.

There are likely many reasons behind the bottlenecks, but one of the most significant is the “investment policy approval” procedure embedded in the Investment Law.

For years, this process has shown itself to be problematic, running counter to the spirit of free enterprise and creating needless bureaucratic barriers.

A historical burden

Before 2005, Vietnam’s investment legal framework clearly distinguished between foreign direct investment (FDI) and domestic investment. While domestic projects required no investment policy approval, FDI projects did.

In 2005, Vietnam passed a unified Investment Law in preparation for WTO accession. Ironically, instead of removing this requirement to ensure equal treatment between domestic and foreign investors, the investment approval obligation was extended to domestic projects.

Thus, a procedure that did not exist for local investors became mandatory - creating administrative burdens, increased costs, and longer timelines.

Over the past 20 years, this requirement and the Investment Law itself have been repeatedly criticized, yet reform efforts have failed. The system remains control-oriented rather than facilitative of investment and business.

Harmful consequences of investment approval

Under current law, investment policy approval involves a government agency authorizing a project’s objectives, location, scale, schedule, investor(s), and any preferential mechanisms or policies.

This raises several critical concerns:

First, why must the state approve the objectives of a private business whose sole aim is profit maximization?

Second, for location, the requirement makes sense only for construction-related projects, which are already governed by the Land Law and Construction Law. Non-construction investments often don’t have a fixed location.

Third, regulating project scale (capital, output, workforce) is out of step with a market economy.

Fourth, the concepts of project “progress” and “duration” are vague and open to varied interpretations between regulators and investors.

Application requirements further highlight the flaws:

Investors must submit a written request to implement the project and agree to bear all costs and risks if rejected. This reinforces the “ask-give” nature of the process, where approval is discretionary and costly.

Other documents include proof of legal status and financial capacity - typically financial statements from the past two years, parental company guarantees, or financial institution backing. This effectively excludes startups and SMEs less than two years old, limiting innovation and competition.

These demands clash with market principles, where decisions on what to produce, where, and how much are investor prerogatives - not state-approved matters.

The procedure thus acts as an unnecessary institutional bottleneck, interfering in business activities and wasting time and money.

An excessive entry barrier

The requirement to obtain approval for each individual project essentially creates a permit regime with heavy bureaucracy. Approval criteria are vague and subjective, increasing the risk of opacity and arbitrariness.

The process takes at least seven weeks at the provincial level - and that’s just the first step. Further permits and approvals follow.

Capital deposit and guarantee requirements raise investment costs, disproportionately affecting small and medium enterprises.

There is duplication between the investment approval and other administrative processes (e.g., land access and construction permits).

It restricts business activity to what regulators understand, suppressing innovation and creativity.

Time to abolish this procedure

The April 24 verification report for the omnibus “One Law Amending Seven Laws” proposal from the Economic-Financial Committee included a recommendation: that the government review and eliminate unnecessary restricted sectors and investment conditions, and abolish the investment approval and certification requirements - keeping only investment incentives and lists of conditional sectors and market access restrictions.

This is a necessary and reasonable suggestion.

Investment approval does not replace more relevant regulatory tools such as environmental assessments, construction permits, land access, or safety and quality standards. Instead, it acts as a redundant bureaucratic layer that undermines the business environment and contradicts current administrative reform goals.

Its core nature reflects the outdated mindset: “you may do what the state allows,” rather than the constitutional principle of “you may do anything not prohibited by law.”

In his essay “New drivers for economic development” supporting Resolution 68, General Secretary To Lam made it clear: “The government must soon issue a directive requiring all ministries, sectors, and localities to shift their administrative processes to post-audit mechanisms, except in specific areas such as national defense and security… All investment licensing processes must be standardized electronically to shorten decision timelines.”

Resolution 68 on private sector development also states: “Innovate the legal framework; eliminate administrative interference and 'ask-give' mechanisms; and discard the mentality of 'if it can't be managed, ban it.' Citizens and businesses may freely operate in any sector not prohibited by law. Restrictions may only be imposed for reasons of defense, national security, public order, ethics, environment, and public health, and must be codified in law.”

“Perfecting the legal system and removing market entry barriers is essential to ensuring a transparent, stable, and low-cost business environment. Digitization, automation, and AI should be fully applied to all procedures, especially in market entry, exit, land use, planning, investment, construction, taxation, customs, insurance, IP rights, and technical standards.”

Following these principles and abolishing investment policy approval would not only unlock 2,200 stalled projects but also unleash capital flows, foster business freedom, and spark innovation.

Tu Giang