2019 Guide to Setting Up a Foreign Construction Business in Vietnam
Table of contents #1 Construction without a company in Vietnam#2 Purchase shares or invest in a construction company in Vietnam#3 Registering a foreign-owned construction company in VietnamClassification of construction projects in VietnamConstruction permit in VietnamAre you considering entering the construction business in Vietnam?Construction business in Vietnam has seen vast growth over the past years. According […]
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Construction business in Vietnam has seen vast growth over the past years. According to Trading Economics, Vietnam’s GDP from construction reached an all-time high of US$ 9.6 billion in the last quarter of 2018 and forecasts show a continuing uptrend.
As Vietnam continues to relax its construction regulations, many foreign investors and overseas companies can benefit from new business opportunities. This guide will give you an overview of the three opportunities available to foreign investors for conducting construction business in Vietnam:
Foreign contractors who do not wish to set up a company to conduct construction business in Vietnam can operate under a construction operating license. This model means that you can execute construction works in Vietnam without setting up a company here.
Per each new contract, one construction operating license is necessary. To apply for a construction operating license in Vietnam, you must first win a construction contract or be selected as a subcontractor as well as enter into a joint venture contract with a local partner.
There are no general requirements for construction contracts in Vietnam. Conditions for foreign contractors to be eligible for a project will be specified at public bidding.
Information about public bids in Vietnam is accessible through the National Bidding System of the Ministry of Planning and investment.
Joint venture contract with a Vietnamese contractor
To start construction works without having your own construction company in Vietnam, you will first need to enter into a joint venture contract with a Vietnamese contractor or a subcontractor.
However, if there is a task in the construction contract that no Vietnamese contractor can execute, you are also allowed only to use foreign contractors.
How long does it take to obtain a construction license in Vietnam?
Once you have been awarded a construction contract and found a local joint venture partner, you must submit your construction license application either to the Ministry of Construction and Provincial Department, or the Provincial Department of Construction.
The processing time of your application is 25 working days after which you should receive your construction operating license.
Setting up an executive office
Once you have obtained your construction license in Vietnam, you also need to set up an executive office at the project’s location before you can begin with the construction.
The executive office must have a:
- registered name
- phone and fax number
- e-mail address
- bank account
- tax code
Once it is set up, you must send a formal notice on the establishment to the competent Department of Construction.
Emerhub can take the burden out of the processes highlighted above. We can help you find a local joint venture partner to obtain your first construction license. Contact our consultants via [email protected].
Another option if you do not want to set up a construction company in Vietnam is to purchase shares in a Vietnam-based joint-stock construction company or invest in a limited liability construction company.
This way you can participate in the construction business in Vietnam through a company that already has the eligibility certificate for construction works.
However, when signing joint venture contracts or acquiring shares in a company in Vietnam, make sure to conduct due diligence and background checks on your new business partners first. Visit our company registry to learn more.
Read more on mergers and acquisitions in Vietnam.
If you aim to engage in the construction business in Vietnam on a larger scale, the third option is to set up a wholly foreign-owned construction company in Vietnam to provide:
- general construction works for buildings and civil engineering
- design activities (such as architectural design)
To operate other construction activities, you must first seek ministry level approval.
Keep in mind that the foreign investor must have a nationality of or corporate residency in a WTO member state.
How to set up a construction company in Vietnam?
The general process of the construction company registration is the same as for any other foreign company registration in Vietnam.
As the first step, you will need to acquire an Investment Registration Certificate (IRC) and a Business Registration Certificate (BRC) from the Department of Planning and Investment (DPI) which can take up to 5 weeks.
Once you have obtained the preliminary licenses, you can proceed with applying for a certificate of eligibility for construction activities in Vietnam. It can take up to one month to receive it.
Vietnam classifies construction investment projects by size, type of construction work, and funding source. There are three classes: I, II, and III.
Class I and Class II are only available to companies that prove prior participation in lower-ranked construction projects in Vietnam.
The Construction Management Department affiliated to the Ministry of Construction issues the Class I certificates and the People’s Committee Service of Construction grants the two other certificates.
If you are setting up a new construction company in the country, you will likely register it in Class III. You can undertake Class III projects if your company satisfies general and special conditions, without evidence of previous participation in construction projects in Vietnam.
Requirements for a Certificate of Eligibility Class III
To receive the Certificate of Eligibility Class III, you need to fulfill the following conditions:
- demonstrate financial capacity and declare the machinery and equipment required for the type of works you are going to execute
- hire at least one employee qualified to hold the position of Class III construction works site manager
- hire technical workers with proper qualifications or certificate of completion of professional training program related to the executed construction works
The certificate of eligibility for construction activities is valid for five years and needs to be re-issued at least 20 days before it expires or changes.
Exceptions for organizations not requiring certificates
Certain organizations can operate even if they are yet to meet the requirements for capacity certificates. For instance, when they conduct operations on:
- projects which require the establishment of economic and technical reports for investment and construction of Class IV works
- projects on repairs, renovation and maintenance of Class IV works when persons in charge of specialist areas from such organizations meet the capacity requirements
To check whether your company needs a certificate, contact Emerhub for a complimentary consultation via [email protected].
Regardless of how you decide to conduct your construction business in Vietnam, you will need a permit for each project. There are three distinct types available:
- new construction permit
- repair and renovation permit
- relocation permit
Which projects don’t need a construction permit in Vietnam?
Some projects are exempt from permits. These include:
- housing development projects under seven stories and total floor area of under 500 m2 (with detailed 1:500-scale plans already approved by competent state agencies)
- works undergoing repair, renovation or installation of interior equipment which does not alter their force-bearing structure and utilities and does not affect the environment and safety of these works
- works undergoing repair and renovation to change their external architecture not facing roads in urban centers subject to architecture management requirements
How long does it take to get a construction permit in Vietnam?
The competent agency will grant a permit within 30 days after receiving a complete application. In the case of separate houses, it will take 15 working days.
Keep in mind that project construction must begin within 12 months of receiving the permit.
Whether you are already investing in Vietnam or want to expand your operations here, the country offers profitable opportunities in its construction industry.
Some notable construction companies in Vietnam and foreign companies successfully investing in Vietnam’s construction business are:
- Cotec Construction Joint Stock Company
- Central Construction Company Limited
- Ricons Construction Investment Joint Stock Company
- Hoa Binh Construction Company
- Turner Construction Company (USA)
- Sumitomo Mitsui Construction Company (Japan)
- AI Construction Company
- Tuan Le Construction Company Limited
- Zhejiang Thermal Power Construction Company (China)
- Binh Chanh Construction Investment Shareholding Company
If you need any assistance in finding joint venture partners in Vietnam, acquiring construction licenses and permits, or setting up a company in Vietnam, do not hesitate to contact Emerhub via the form below. Our consultants will assist you gladly.
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