▶️ Overview
Vietnam has been making significant strides in recent years in the development of its digital infrastructure particularly regarding the data center sector. Since the country is aiming to achieve a digital economy that contributes to 20% of its GDP by 2025 the demand for data processing and data centers is growing.[1]
▶️ Legal framework
Currently, the legal framework for investing in data centers or establishing one is somewhat unspecific. Since data center services are classified as conditional business lines, they are partly regulated by the Law on Investment 2020, and partly regulated by the Cybersecurity Law and Circular 03/2013/TT-BTTTT.
However, to adapt to the growing data center industry, regulation of data center and cloud computing services have been consolidated in the new Law on Telecommunications (the new Law). The new Law is set to come into effect on July 1, 2024, although the provisions regulating data center and cloud computing services will not take effect before January 1, 2025.
The new Law defines different types of telecommunication services, one of these is data center services. It- also includes the establishment and operation of data centers.
Data centers are defined as telecommunications facility, including a house, station, cable system, computer and electrical system and auxiliary equipment installed into it to process, store and manage data of one or more organizations and individuals.[2]
Data center services means a telecommunications service that provides information processing, storage and retrieval features to users over telecommunications networks by leasing part or the whole of a data center.[3]
Furthermore, the new Law specifies the rights and obligations of companies who are aiming to provide and use data center services.[4] It is worth mentioning that direct investments by foreign investors in data center services are not subject to any restrictions on capital contributions and share ownership ratios. Under the new Law, an enterprise providing those services can be wholly owned by foreign investors.[5] Offering data center services is subject to registration and notification procedures.[6] Those procedures are yet to be specified in detail, but it is to be expected that the Government will elaborate them in the future.
Before putting a data center into commercial use, the enterprise must announce the conformity of the data center with standards and technical regulations as prescribed by the Minister of Information and Communications.[7]
Likewise, an enterprise providing data center services must comply with the regulation on cyberinformation security, cybersecurity, personal data protection and other relevant laws.[8] One salient point is that the law excludes the enterprise’s liability for the contents processed, stored, and retrieved data unless otherwise specified.[9]
▶️ Key takeaways
Until the new Law comes into effect, there are two feasible options to set up and operate a data center in Vietnam as a foreign entity. One option is to establish a local company in the form of a joint venture, the other is to cooperate with a local business partner. Depending on the chosen procedure, different certificates and ownership share ratios must be considered. It is also worth noting that under Vietnamese law, foreign investors cannot own land, instead, the ownership can be under the local partner and the right to use the land must be established (“Land Use Rights”).
Any existing licenses for the operation of data centers remain valid until their expiry date, even beyond 2025.
The new Law shall make investments in data center services less complicated and more predictable.
The data center sector in Vietnam is full of potential and will continue to be an interesting investment opportunity. Contact our team at RBA to discuss the challenges of investing in data centers and learn how we can help you thrive in this market.
[1] Decision No. 749/QD-TTg 2020
[2] Clause 23 Article 3 Telecommunication Law
[3] Clause 9 Article 3 Telecommunication Law
[4] Article 29 Telecommunication Law
[5] Clause 1a Article 29 Telecommunication Law
[6] Clause 2a Article 29, Article 41 Telecommunication Law
[7] Clause 3 Article 29 Telecommunication Law
[8] Clause 2b Article 29 Telecommunication Law
[9] Clause 1c) Article 29 Telecommunication Law
