BENEFITS AND RISKS FOR DOMESTIC ENTERPRISES WHEN ENGAGING IN INTERNATIONAL COOPERATION AND FOREIGN INVESTMENT

In the context of globalization, international cooperation and foreign investment by domestic enterprises play an important role in enhancing competitiveness and expanding markets. However, in order to participate in such activities, enterprises are required to comply with Vietnamese laws and regulations governing international cooperation and outbound investment, particularly the Law on Investment and its guiding decrees.

1. Benefits of International Cooperation and Foreign Investment

International cooperation and foreign investment bring numerous benefits to domestic enterprises, particularly in the context of global economic integration, specifically as follows:

• Access to New Markets: Enterprises have the opportunity to expand their business activities into international markets, not only to increase revenue but also to mitigate risks arising from dependence on the domestic market.

• Technology Transfer: Through cooperation with foreign enterprises, domestic enterprises may receive and apply advanced technologies, thereby enhancing productivity and product quality.

• Enhancement of Management Capacity: Such cooperation also enables domestic enterprises to gain access to advanced management methods, thereby improving operational capabilities and promoting sustainable development.

2. Legal Regulations on International Cooperation and Foreign Investment

The outward investment of domestic enterprises is clearly governed by the Law on Investment 2020 (Law No. 61/2020/QH14) and relevant decrees. Pursuant to Articles 51, 53, and 54 of the Law on Investment, enterprises are required to satisfy the following conditions in order to be granted permission for outward investment:

• Consistency with the National Socio-Economic Development Strategy: Outward investment activities must not adversely affect national security, social order and safety, or other legitimate interests of the State.

• Not Falling within Prohibited Investment Sectors: Enterprises are not permitted to invest in sectors and trades prohibited by the State, such as weapons, toxic chemicals, rare wildlife, or activities that may adversely affect the environment and human health.

• Sufficient Financial Capacity: Enterprises must demonstrate adequate financial capacity to implement the investment project, including assurance that such investment does not negatively affect domestic production and business activities.

Pursuant to Clause 1, Article 78 of Decree No. 31/2021/NĐ-CP, domestic enterprises making outward investments are required to carry out procedures for obtaining an Outward Investment Registration Certificate. The main components of the application dossier include the investment decision, financial plan, and documents evidencing satisfaction of the investment conditions in accordance with applicable laws.

3. Forms of International Investment Cooperation

Vietnamese enterprises may participate in international cooperation and foreign investment in various forms, such as:

• Joint Ventures: This is a common form of cooperation in which a Vietnamese enterprise and a foreign enterprise jointly contribute capital to establish a joint venture company operating in the international market. This form enables domestic enterprises to leverage the partner’s resources, such as technology, human resources, or customer networks.

• Mergers and Acquisitions (M&A): This form allows Vietnamese enterprises to acquire or merge with a foreign enterprise, thereby gaining immediate access to existing markets and infrastructure. Decree No. 31/2021/NĐ-CP guiding investment clearly stipulates the conditions for conducting M&A transactions, including compliance with competition laws and the protection of shareholders’ rights and interests.

• Direct Investment (FDI): Vietnamese enterprises may directly invest in other countries by establishing subsidiaries or branches abroad. This enables enterprises to exercise full control over business operations; however, it also requires greater management capacity and financial resources.

4. Risks and Challenges in the Process of Foreign Investment

In addition to the benefits, foreign investment also entails various risks and challenges, including:

• Legal Risks: Enterprises may face different legal systems when operating abroad. Each country has its own regulations on taxation, labor, environment, and intellectual property. Without a thorough understanding of these regulations, enterprises may encounter legal difficulties.

• Political and Economic Risks: Changes in economic policies or political instability in the host country may adversely affect the business operations of enterprises.

• Management and Operational Challenges: Managing overseas branches or joint ventures requires enterprises to possess global management skills and the ability to adapt to local business cultures. Without thorough preparation, enterprises may encounter difficulties in management and sustainable development.

CONCLUSION: International cooperation and foreign investment constitute an important strategy for Vietnamese enterprises in the process of global economic integration. However, to achieve success, enterprises must have a clear understanding of relevant legal regulations and make thorough preparations in terms of finance, management, and adaptability to the international business environment. At the same time, understanding and complying with legal regulations will help enterprises mitigate risks and enhance investment efficiency.