Investing in Cloud Computing Services for Foreign Investors in Vietnam

1. How are cloud computing services regulated in Vietnam?

According to Article 3 of the Law on Telecommunications No. 24/2023/QH15, dated November 24, 2023 (effective from July 1, 2024), Data Centers and Cloud Computing in Vietnam are defined as follows:

"10. Cloud computing is a model that allows for flexible, adjustable, and on-demand use and management of shared computing resources, including networks, servers, storage devices, and applications.

11. Cloud computing service is a telecommunications service that provides information processing, storage, and retrieval capabilities to users over a telecommunications network via cloud computing."

2. What are the forms of foreign investment in cloud computing services in Vietnam?

As stipulated in Article 29 of the Law on Telecommunications, investment in data center services and cloud computing services is not subject to foreign ownership limits on share capital, contributed capital, or the contribution ratio of foreign investors in a business cooperation contract. Therefore, foreign investors can choose from the following forms:

• Establish a 100% foreign-owned enterprise.

• Establish a joint venture with a Vietnamese partner by contributing capital or acquiring shares without any ownership ratio restrictions.

• Sign a Business Cooperation Contract (BCC) with a Vietnamese partner to operate without establishing a new legal entity.

3. Procedures for establishing a cloud computing service provider in Vietnam:

3.1 Investment Registration and Enterprise Establishment:

Foreign investors wishing to establish a company in Vietnam to operate a data center must first comply with Vietnam's investment and enterprise registration procedures, which include:

• Investment Registration Certificate (IRC): Mandatory for all foreign-invested projects.

• Enterprise Registration Certificate (ERC): To formally establish a legal entity in Vietnam.

Special Notes:

• In-principle Investment Approval: May be required for projects involving land allocation, land lease without auction, or conversion of land use purposes.

• M&A Approval: Mandatory if the foreign investor acquires shares/capital contributions in an existing telecommunications enterprise, as this is a conditional investment sector.

3.2 Telecommunications Service License under the Law on Telecommunications

After obtaining the IRC and ERC, enterprises providing data center services must register as telecommunications service providers under the Law on Telecommunications. Data center service providers in Vietnam must register with the Ministry of Science and Technology (MOST) (formerly the Ministry of Information and Communications). The registration process includes:

• Application Dossier Requirements:

  • A completed application form (Form No. 25 of Decree 163).

  • A copy of the Enterprise Registration Certificate or Investment Registration Certificate.

  • A technical plan demonstrating compliance with technical, safety, and infrastructure security standards.

• Detailed Application Information: The application must include information about the enterprise (name, address, registration details, and contact information), a description of the telecommunications services to be provided, and specific details about the infrastructure (e.g., location, capacity, standards, internet connectivity, and security measures).

• Statutory Timeline: MOST will review the application within three (3) working days and issue the certificate within five (5) working days if the requirements are met. However, the actual processing time may vary. Re-registration is required in case of changes to the company's name or infrastructure.

• Before commencing operations, the data center service provider must declare the conformity of the data center with national technical standards and regulations as currently stipulated.

4. Key regulations regarding land use and construction to be carefully considered:

• Land Use Rights: According to the Land Law and its guiding documents, foreign investors can obtain land use rights through the following common forms:

  • Industrial Parks, High-Tech Parks: Investors can lease land within designated industrial or high-tech parks from the management boards of these zones.

  • Outside Industrial/High-Tech Parks: The provincial-level People's Committee where the data center is located is authorized to lease land for its construction. The land lease must be consistent with the national information and communications infrastructure master plan, the passive telecommunications infrastructure master plan, and the land use plan.

• Construction: The construction of a data center requires a construction permit from the provincial-level People's Committee or the management board of the industrial/high-tech park, in accordance with the Law on Construction No. 50/2014/QH13 and its guiding documents.

• Technical Standards: The construction must strictly comply with national technical standards (TCVN) and international standards (e.g., ANSI/TIA-942-B) regarding design, fire prevention and fighting (QCVN 06:2021/BXD), lightning protection (QCVN 32:2020/BTTTT), and grounding (QCVN 9:2016/BTTTT).

5. Rights of data center and cloud computing service providers:

Enterprises providing data center and cloud computing services have the following rights:

• To build, install, and own telecommunications equipment systems and transmission lines within their facilities and public service points to provide telecommunications services to users.

• To lease transmission lines to connect their telecommunications equipment systems, facilities, and public service points to each other and to the public telecommunications networks of other enterprises.

• To be allocated telecommunications resources in accordance with the provisions of this Law on the management of telecommunications resources.

• To research, develop, and pilot new technologies and new models in telecommunications activities.

• Other rights as stipulated by the Law on Enterprises and other relevant laws.

• Not to be held liable for the content of user information during the process of processing, storing, and retrieving information, unless otherwise provided by other laws.

6. Obligations of data center and cloud computing service providers:

Enterprises providing data center and cloud computing services have the following obligations:

• To carry out the registration and notification for providing telecommunications services as required by law.

• To comply with the laws on cybersecurity, network security, personal data protection, and other relevant legal regulations.

• To ensure that other telecommunications enterprises can connect to and provide services to users of the data center services.

• Not to access, exploit, or use the data of service users that is processed, stored, and retrieved through the enterprise's services without the user's consent.

• To promptly take necessary measures to prevent access to information upon the request of competent state authorities in accordance with the law.

• Not to monitor or supervise the information of service users, except upon the request of competent state authorities in accordance with the law.

• To store and manage the information of service users provided upon entering into contracts for the provision and use of telecommunications services, as regulated by the Government.

• To publish the quality of the services they provide.

• To perform other tasks as required by regulations.

7. Conclusion and Recommendations

The data center and cloud computing market in Vietnam is full of potential but also presents significant legal challenges. A thorough understanding of and strict compliance with regulations on investment, licensing, cybersecurity, and data protection are key to success for foreign investors.

To ensure a smooth investment process and mitigate risks, businesses should seek professional advice from law firms with extensive experience in the technology and investment sectors in Vietnam.

 

The information contained in this article is general and intended only to provide information on legal regulations. DB Legal will not be responsible for any use or application of this information for any business purpose. For in-depth advice on specific cases, please contact us.

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