Vietnam - Key legal issues for foreign lenders

Insights and Analysis

Vietnam - Key legal issues for foreign lenders

12 September 2023

Foreign loan capital (including lending and corporate bonds issuance) remains an important source of funding for the Vietnamese economy. According to a report published by the Ministry of Finance in early 2023, the total foreign debt owed by Vietnamese companies (i.e., commercial debt other than public debt) in the first half of 2022 was nearly US$100 billion, accounting for about 70 per cent of total foreign debt.

The demand by Vietnamese borrowers for foreign loans is expected to increase significantly due to stricter scrutiny by the State Bank of Vietnam (SBV) on lending by local banks to certain fast-growing but high-risk sectors including real estate and securities. Government investigations into the bond and real estate markets that have been ongoing since 2021 have also impacted the availability of local bond financing, which had previously been the principal source of funding for the real estate sector.

In this article, we discuss key legal and practical challenges in cross-border financing in Vietnam together with Vietnam’s insolvency and bankruptcy regime.