In an effort to control foreign labour, Vietnam issued Decree 102/2003/ND-CP (decree) and Circular 03/2014/TT-BLDTBXH dated January 20, 2014 (circular), setting out stricter conditions for foreigners working in Vietnam, will have a serious affect on the ease of foreign workers to find and maintain employment in the country.
In order to put Vietnam’s commitments to the World Trade Organization on services into effect, the decree and circular include a number of concepts that have been introduced under these commitments. However, as an unintended side-effect, this inclusion causes discrimination between service and production companies.
For example, the decree includes “foreigners coming to Vietnam to offer services”, but does not mention foreigners coming to Vietnam to offer goods. So, although foreigners offering services are exempt from work permits, a confirmation of work permit exemption is still required. However, as the decree does not make specific mention of foreigners coming to Vietnam to offer goods, such foreigners may be understood as either not allowed to work in Vietnam, which is unrealistic, or as being exempt from the work permit requirement.
In addition, while the decree exempts sponsored foreigners working in foreign-invested service companies from needing work permits, those in production companies are still required to apply for work permits. Furthermore, the work permit requirement for foreigners coming to establish a commercial presence in Vietnam, as supported by the WTO commitments, is unnecessary and unfeasible in practice.
Removing the work permit exemption for foreigners coming to Vietnam to work for a short period of time (less than three months) is also a step backwards. As required by law, when applying for a work permit, numerous documents need to be submitted to authorities, which may take one to two months to compile. Additionally, it may take 30 days to receive a report and an explanation on foreign labour demand approved by local people’s committees, and another 10 working days, as provided by law (but in practice often longer), to get a work permit. It doesn’t make sense to go through a two or three month process to prepare work permit documents for an individual, if said individual will only be working in Vietnam for a few days. If there continues to be such a gap between what is stated in the law and what is feasible in practice, this will only encourage non-compliance.
More recently, the Department of Labour, Invalids and Social Affairs of Ho Chi Minh City issued Official Letter 6107, which requires foreigners whose work permits were granted under the previous regulations and have now expired, to apply for a newly issued work permit, rather than obtaining an extended work permit (also known as a reissued work permit). However, work permits which were issued before the effective date of Decree 102 (November 1, 2013), upon expiration, are still eligible for reissuance as per the old regulation.
Work permits for foreigners in Vietnam are comparable to investment certificates for foreign companies to invest in Vietnam. For instance, imagine if instead of being able to extend its investment certificate, a foreign investor is required to apply for an entirely new investment certificate. What if by the time the current investment certificate expires, there are new conditions set forth by law that the investor cannot meet? Would this mean that this investor would need to close all of its factories and terminate all of its employees and leave Vietnam for good? It’s unlikely that this would be the type of policy that the Vietnamese government would want to enforce on foreign investors. The work permit situation for foreigners in Vietnam is analogous to this case.
The application process to acquire a newly issued work permit is burdensome, requiring among other things, two criminal records issued by both the authorities of Vietnam and the relevant foreign country, which are difficult to obtain, as well as the notarised degrees of the foreign employee, which is a time-consuming process. These items were not required under the previous regulations on work permits, which allowed for work permit extension (or reissuance). Many foreigners are worried about how to get their criminal record from their home country, as it is common for some countries to require a signature done in person or to not grant criminal records to citizens in absentia. Having to fly home in order to obtain this piece of paper to satisfy these new conditions seems unreasonable.
Many foreigners have lived in Vietnam for so long that it may be difficult for them to get a police clearance from their home country due to the length of time they have resided abroad. It would be ironic if some foreigners were unable to satisfy the new requirements for working and living in Vietnam due to the fact that they have been working and living in Vietnam for so long.
Although many international law firms, such as ours, are able to help with this process, these regulatory changes have disheartened many foreigners who have chosen Vietnam as their second home. The additional application process is troublesome and costs foreigners and enterprises time, money, and energy. More importantly, it decreases trust among foreigners that Vietnam is a stable investment environment.
For whatever is hoped to be gained from these changes through a government management perspective, it must be done through a scheme that is logical, fair and not overly burdensome. In order to maintain the high quality foreign work force that the country is in need of, it is necessary to cut down the red tape and excessive requirements.
(*) Nguyen Lan Phuong, Partner of Baker & McKenzie, and Pham Tri Trung, Senior Associate of Baker & McKenzie, based in Ho Chi Minh City and Hanoi respectively.
For example, the decree includes “foreigners coming to Vietnam to offer services”, but does not mention foreigners coming to Vietnam to offer goods. So, although foreigners offering services are exempt from work permits, a confirmation of work permit exemption is still required. However, as the decree does not make specific mention of foreigners coming to Vietnam to offer goods, such foreigners may be understood as either not allowed to work in Vietnam, which is unrealistic, or as being exempt from the work permit requirement.
In addition, while the decree exempts sponsored foreigners working in foreign-invested service companies from needing work permits, those in production companies are still required to apply for work permits. Furthermore, the work permit requirement for foreigners coming to establish a commercial presence in Vietnam, as supported by the WTO commitments, is unnecessary and unfeasible in practice.
Removing the work permit exemption for foreigners coming to Vietnam to work for a short period of time (less than three months) is also a step backwards. As required by law, when applying for a work permit, numerous documents need to be submitted to authorities, which may take one to two months to compile. Additionally, it may take 30 days to receive a report and an explanation on foreign labour demand approved by local people’s committees, and another 10 working days, as provided by law (but in practice often longer), to get a work permit. It doesn’t make sense to go through a two or three month process to prepare work permit documents for an individual, if said individual will only be working in Vietnam for a few days. If there continues to be such a gap between what is stated in the law and what is feasible in practice, this will only encourage non-compliance.
More recently, the Department of Labour, Invalids and Social Affairs of Ho Chi Minh City issued Official Letter 6107, which requires foreigners whose work permits were granted under the previous regulations and have now expired, to apply for a newly issued work permit, rather than obtaining an extended work permit (also known as a reissued work permit). However, work permits which were issued before the effective date of Decree 102 (November 1, 2013), upon expiration, are still eligible for reissuance as per the old regulation.
Work permits for foreigners in Vietnam are comparable to investment certificates for foreign companies to invest in Vietnam. For instance, imagine if instead of being able to extend its investment certificate, a foreign investor is required to apply for an entirely new investment certificate. What if by the time the current investment certificate expires, there are new conditions set forth by law that the investor cannot meet? Would this mean that this investor would need to close all of its factories and terminate all of its employees and leave Vietnam for good? It’s unlikely that this would be the type of policy that the Vietnamese government would want to enforce on foreign investors. The work permit situation for foreigners in Vietnam is analogous to this case.
The application process to acquire a newly issued work permit is burdensome, requiring among other things, two criminal records issued by both the authorities of Vietnam and the relevant foreign country, which are difficult to obtain, as well as the notarised degrees of the foreign employee, which is a time-consuming process. These items were not required under the previous regulations on work permits, which allowed for work permit extension (or reissuance). Many foreigners are worried about how to get their criminal record from their home country, as it is common for some countries to require a signature done in person or to not grant criminal records to citizens in absentia. Having to fly home in order to obtain this piece of paper to satisfy these new conditions seems unreasonable.
Many foreigners have lived in Vietnam for so long that it may be difficult for them to get a police clearance from their home country due to the length of time they have resided abroad. It would be ironic if some foreigners were unable to satisfy the new requirements for working and living in Vietnam due to the fact that they have been working and living in Vietnam for so long.
Although many international law firms, such as ours, are able to help with this process, these regulatory changes have disheartened many foreigners who have chosen Vietnam as their second home. The additional application process is troublesome and costs foreigners and enterprises time, money, and energy. More importantly, it decreases trust among foreigners that Vietnam is a stable investment environment.
For whatever is hoped to be gained from these changes through a government management perspective, it must be done through a scheme that is logical, fair and not overly burdensome. In order to maintain the high quality foreign work force that the country is in need of, it is necessary to cut down the red tape and excessive requirements.
(*) Nguyen Lan Phuong, Partner of Baker & McKenzie, and Pham Tri Trung, Senior Associate of Baker & McKenzie, based in Ho Chi Minh City and Hanoi respectively.
