France was the dominant foreign investor in Indochina before World War II. Resident Chinese, however, played a major role in rice milling, retailing, and other activities (and continued to do so in the south through the early 1970s). Following the 1954 partition agreement, the French economic position in the DRV was completely liquidated, and the participation of private foreign investors in the DRV economy was prohibited. The RVN government encouraged the introduction of private capital. In March 1957, a presidential declaration provided guarantees against nationalization and expropriation without due compensation, temporary exemption from various taxes, and remittance of profits within existing regulations. Despite these efforts, because of wartime conditions, relatively little new private foreign investment was attracted to the country, apart from a few ventures by US and Japanese interests. In 1977, the SRV issued a new investment code in an effort to attract private foreign capital to help develop the country. However, because of stringent regulations and a climate of government suspicion of private enterprise, the 1977 code attracted little enthusiasm among potential investors. Only the USSR and France made sizable investments, although in recent years Japan has laid the foundation for future investment by bank loans. Beginning in 1984, the regime began to encourage the formation of joint ventures and announced that preparations were under way for a new foreign investment code.
In 1987 the National Assembly passed a liberalized investment law seeking to improve the overall investment climate and emphasize the development of export industries and services. The Vietnamese investment laws were much more liberal than those of other countries in Southeast Asia. The code permitted wholly owned foreign enterprises in Vietnam, levied low taxes on profits, allowed full repatriation of profits after taxes, and guaranteed foreign enterprises against government appropriation. The law also encouraged oil exploration. Factors hindering performance of foreign investors are bureaucracy, lack of management expertise, smuggling and corruption, and an underlying distrust and uncertainty on the part of officialdom.
In early 1994 the government announced three proposals intended to improve the investment environment and increase foreign trade: expedited decisions on small investment projects; the elimination of the requirement for import-export licenses for many commodities; and reduced list of industries that would be off limits to foreign investors. Foreign investments were allowed in insurance companies and brokerages, and reinsurance between companies. Under amendments to the Foreign Investment Law in 1996 more authority over investment licensing was given to local governments.
Total foreign direct investment (FDI) approvals from 1988 to June 2002 amounted to $38.58 billion, but the total disbursed was a little over $20 billion, about 52% of approved FDI. Since the 1994 reduction of restrictions, however, actual inflows of FDI have averaged about 70% of the approvals. After the Asian financial crisis, the level of inflow decreased by about $900 million a year. From 1994 to 1997, inflow average, and from 1998 to 2000, the annual average inflow was $1.7 billion. The main cause of the decline is reduced investments from other Southeast Asian countries. As of 2003, it is estimated that FDI projects produce 13% of the country's GDP, including 36% of industrial production. As of 1999, Singapore was the largest foreign investor with $5.9 billion of total investments approved by the Vietnam government between 1988 and 1999 (only $2 billion actualized). Other major investors included Taiwan, Hong Kong, Japan, South Korea, France, the British Virgin Islands, Russia, the United States, and the United Kingdom. The Vietnamese government controls both upstream and downstream oil and gas industries, but since 1998 foreign investment has been permitted. In October 2001, the consortium that included Conoco, the Korean National Oil Company (KNOC), SK Corporation of South Korea, and Geopetrol of France made a major find of oil in the Cuu Long Basin. In November 2002, the Japan Vietnam Petroleum Comany (JVPC) made its first sizeable discoveries. JVPC is the operator in the joint venture. and holds a 46.5% share