The draft sets out that regulators could set varying caps on foreign acquisition of local enterprises if they choose to contract out or merge and acquire, rather than equities.

“This means foreigners will be able to buy more than the current maximum stake (30 percent) from local State-owned companies,” said John Nolan, an analyst from a Ho Chi Minh City-based fund management company.

He said the move would likely help attract more overseas capital to the market. The influx could help local firms access more advanced technologies, raising their competitiveness in both domestic and overseas markets.

“The equitisation of local enterprises is not working well because the State is keeping a major stake in firms,” said Nguyen Phong Nam from a n investment company in Hai Phong Port City.

Local firms have kept their dependence on State subsidies, weakening their competitiveness compared with fully-private firms.

The draft also addressed foreigners’ right to purchase stakes from local private firms and limited liability companies with at least two members.

More foreign investment in the market could raise concerns of greater foreign control.

“As foreigners buy greater stakes, they have more management control. They get a greater say in how the business works to earn higher profit, part of which will make its way into their pockets,” said one independent lawyer who asked to remain anonymous.

More foreign control could also lead to Westernised management of local enterprises, the lawyer noted, making Vietnam as a whole more susceptible to Westernisation via overseas investors.

“If we have an obvious framework on this matter, we can avoid those things,” the lawyer said.

Nguyen Minh Phong, head of the socio-economic division under Hanoi Economics Institute, suggested regulators could determine foreign ownership caps based on the type of industry.

For industries of national interest, the State could limit the foreign cap to under 49 percent. Other industries could have more flexible foreign ownership caps, but would still be kept under the supervision of regulators.