Inadequacies in providing advertising services for foreign investors

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Advertising is the employment of various means to present the public with profitable products, goods and services; non-profitable products and services; organizations and individuals trading and providing the presented products, goods and services, except for news, social policies, and personal information.

In recent years, advertising services have been a field of interest to foreign investors, but barriers and inadequacies of Vietnamese law make it impossible for many investors to do so. Specifically, according to Vietnam’s WTO service commitments, Vietnam has opened the market for advertising services for foreign investors by establishing joint ventures or cooperating with Vietnamese partners allowed to do business in advertising services. Moreover, since January 1, 2009, there has been no limit on the percentage of foreign capital contribution in the joint venture.

However, investment licensing agencies in localities and the Ministry of Culture, Sports and Tourism, the Ministry of Planning and Investment have different views on applying the law, leading to inconsistency, causing many difficulties for foreign investors. Here are examples of inadequacies and inconsistencies between government authorities:

In 2020, an American investor invested in Vietnam to purchase a capital contribution of a limited liability company owned by a Vietnamese individual to hold 70% of the contributed capital. This Company is currently operating in the field of advertising. However, when carrying out investment procedures at the Department of Planning and Investment of Ho Chi Minh City, the investor was answered not to meet the investment requirements because the Vietnamese partner did not meet requirements in the field of advertising. According to the explanation of the Department of Planning and Investment of Ho Chi Minh City, a Vietnamese partner participating in a joint venture or business cooperation must be an organization that has been licensed to provide advertising services. Therefore, in this case, the Vietnamese partner was an individual who did not meet the requirements.

Besides, on June 13, 2019 , the Ministry of Planning and Investment has issued a document guiding business investment in the field of advertising services. Accordingly, the Ministry of Planning and Investment stated:

In case of registration of a project associated with the establishment of an economic organization: The foreign investor must perform a business cooperation contract or a joint venture with at least one Vietnamese partner who has been authorized to “do business in advertising services”.

For registration of contributing capital or purchasing of shares/stakes in Vietnamese enterprises, in case foreign investors registering to contribute capital/ purchase shares/stakes in Vietnamese enterprises with a ratio of less than 100 % and registered for the business of advertising services, “the Vietnamese partner has been licensed to provide advertising services”. Thus, according to the WTO Commitments, an economic organization receives a capital contribution or shareholders/capital-contributing members of economic organizations receive the contributed capital.

Regarding the above issue, in Document No. 2684/BVHTTDL-KHTC on July 11, 2019, the Ministry of Culture, Sports and Tourism had a different opinion:

For registration of investment projects associated with establishing an economic organization: According to the WTO Commitments, foreign service suppliers can establish joint ventures or perform business cooperation contracts to carry on the advertising service with Vietnamese legal entities; no quantity is required. Thus, one or more legal entities are suitable.

In case of registration of capital contribution/purchase stakes in a Vietnamese enterprise: According to current law, there is no concept of licensing business eligibility for owners/ capital contribution members/ shareholders of the enterprise as individuals.

As a result, it can be seen that there are different opinions to understand between the governmental agencies. Up to this moment, most local investment licensing agencies think that the Vietnamese partner participating in a joint venture or business cooperation must be an organization, not an individual-owned organization that has a business in advertising in the above situation.

As the view of the author, it is reasonable if the investment licensing agencies apply the law according to the guidance of the Ministry of Planning and Investment and accept the foreign investors participating in investment in the form of capital contribution, share purchase/purchase of stakes in an economic organization providing advertising services.

Because not all advertising services must be licensed by a state agency according to the provisions of the Law on Advertising, and the enterprises only need to meet the conditions to register the advertising business under code VSIC 7320 of the Vietnam Economic Industry System.

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