The Vietnamese government over the past ten years or so has softened its approach to foreign investment considerably. Although foreign ownership limitations still exist for a number of industries, education is a sector where there is no foreign ownership limitation. It is however a sector where the government still has approval rights over foreign investments. Nevertheless, it is possible for a foreign investor to own 100 percent of the education business.
Foreign investors normally invest in schools that can teach a foreign curriculum. The most popular foreign curricula are US, Canadian, Australian and British but other options are available. There are three main models that permit the teaching of foreign curricula: (1) model 1 – an ‘international school’ teaching a foreign curriculum only, (2) model 2 – a ‘bilingual school’ teaching both foreign and Vietnamese curricula on an integrated basis and (3) model 3 – a ‘bilingual school’ teaching both foreign and Vietnamese curricula in parallel.
Here are few things to consider before joining any deal,
Deal structure
Requirements and conditions applicable to foreign-owned education institutions (FOEIs) are much higher than those applied to local private schools. If you want to set up a new school, looking at the three models of an FOEI as set out above, it is easiest to do it under model 1. Most of the foreign investment transactions in models 2 and 3 are done by acquiring existing local private schools already set up by Vietnamese shareholders. You may need to do this in a way which means the acquired school is not technically an FOEI.
Land
What is the deal on the land? You can’t own it outright. An FOEI can lease land from the government only, for a maximum of 50 years. Make sure you get your land use right certificate and it has all the correct information in it. An alternative, offered by Decree 86, is that you can lease buildings from an individual or organization for educational purposes. Remember that having facilities is an important part of a school’s ability to operate – the licensing authorities may look on your application quite unfavorably if this is not in place or ready to go when you make the relevant applications (see below).
Education licenses
To get the relevant decisions and licenses, you must prepare and provide a comprehensive plan for developing and operating the institution including detailed development and training plans, the ability to meet statutory investment conditions, the nature of your teaching program, the teaching materials you will use, a list of teachers and lecturers, a description of the teaching or training levels, among many other things. Once you’ve submitted all of these, prepare to wait. Statutory time limits are a couple of months, but it can drag on much longer. If you want your new school to start around the time of the next school year, you need to be thinking at least one year ahead.
Corporate licenses
You will need some corporate licenses as well. If you’re an FOEI, you’ll likely need an investment registration certificate in addition to other things (though in some cases, you may not). Vietnamese law requires that this be obtained before getting any other corporate licenses so check with your lawyers first before proceeding with any applications.
Staff work
Be careful of falling into the start-up trap. While it might be tempting to follow the lead of many start-ups, and indeed other education businesses here, and contract with your staff as service providers rather than employees, the Vietnamese government is well-aware of this practice and is keen to stamp it out.
From 1 January 2021, a new Labour Code will apply. If a contract contains the elements of an employment contract, it will be treated as an employment contract irrespective of how it is described. Employees have certain rights under the law and employers have certain obligations to them (including payment of compulsory social insurance, health insurance and unemployment insurance). If there is a union, or you think the staff will want to be part of one, start talking with them. You can’t stop them from forming one but it’s better to be prepared than not.