Key takeaways
- From 14 January 2024, Vietnam shall impose no limitations on foreign equity for game companies with foreign investors from CPTPP member countries.
- Specific guidance may be required to clarify as to whether this means a complete elimination of the joint venture requirement.
In depth
Currently, Decree No. 72/2013/ND-CP (as amended by Decree No. 27/2018/ND-CP) on the management, provision and use of Internet services and online information specifically provides that foreign service providers of online electronic games must establish local enterprises to provide their services in Vietnam. This means that cross-border provision of online games from outside of Vietnam is not allowed, and any foreign company interested in providing game services in Vietnam must set up an entity in Vietnam and publish their games locally. Foreign ownership ratio in such game companies must comply with the international treaties to which Vietnam is a party.
Under Vietnam’s WTO Commitments, a local game company must be established as a joint venture with a Vietnamese partner who is specifically licensed to provide online gaming services. Foreign capital contribution must not exceed 49% of the charter capital of the joint venture.
As Vietnam is a member of the CPTPP, foreign investors originating from a CPTPP member country may apply the market access conditions set out under the CPTPP instead of WTO Commitments. Specifically, under Annex 1 of Vietnam's CPTPP commitments, the market access conditions for foreign investors in the electronic game sector are as follows:
- Foreign investment to supply electronic games services may not be supplied except through (i) a business cooperation contract; (ii) a joint venture with a Vietnamese partner authorized to supply such services, or (iii) the purchase of shares in a Vietnamese enterprise authorized to supply such services.
- From 2019, foreign investment of up to 51% of the charter capital is allowed in enterprises providing electronic game services over the Internet.
- Five years after the date of entry into force of CPTPP for Vietnam, foreign ownership limitations for electronic game services will be eliminated.
The CPTPP entered into force for Vietnam on 14 January 2019 and therefore, 14 January 2024 would be considered five years after the date of its entry into force. Consequently:
- From 14 January 2019, foreign investors from CPTPP member countries may own up to 51% of the charter capital in Vietnam companies providing electronic games over the Internet.
- From 14 January 2024, Vietnam shall impose no limitations on foreign equity for game companies with foreign investors from CPTPP member countries.
However, at this stage, it is unclear whether this wording means that the joint venture requirement will also be eliminated from 14 January 2024. If the joint venture requirement will still be applicable after 14 January 2024, although there are no explicit limitations on foreign equity, foreign investors will still need local joint venture partners in game companies in Vietnam. Relevant licensing authorities, such as the Ministry of Information and Communications, have yet to issue official guidance on the application of the new market access conditions under the CPTPP. However, we note that a publication from the Ministry of Industry and Trade states that foreign investment up to 100% is allowed – it should be noted that this publication is meant for reference, not a legislative document.1
The full Vietnamese text of Annex 1 of Vietnam's CPTPP commitments can be found here.
1 The publication is available in Vietnamese on the on the Vietnam Free Trade Agreement Portal of the Government at this link.
