Hanoi - Vietnam's Prime Minister approved the scrapping of a 49 per cent foreign ownership cap across many listed firms on Friday in one of the country's boldest economic reforms yet, although some sectors will remain restricted.

The communist government is stepping up reforms to the US$184 billion (S$248 billion) economy after years of delay that have frustrated foreign investors keen to tap the potential of its private sector.

The decree signed by Prime Minister Nguyen Tan Dung was published late on Friday and will take effect in September.

It is complex and sometimes vague, stating that new rules on foreign ownership will apply to sectors Vietnam has committed to open up in its "international agreements", without specifying which agreements.

It said foreign caps of 49 per cent would still apply for areas where "conditions" were placed on foreign investments, except for sectors governed by separate ownership regulations, such as banking, where total foreign stakes are limited to 30 per cent.

All other equities would have no foreign limits, unless restricted by the companies themselves.

Long criticised for protectionism, Vietnam has eased foreign restrictions in areas such as banking and property and is pursuing the part-privatisation of hundreds of state-run firms, from airports and textile companies to breweries and ports, which will eventually list on its stock market.

Asset management firm VinaCapital director Duong Vuong said foreigners were interested in the market but had long been shackled by ownership limits.

"Everyone has been waiting for this for a long time... It's good timing with everything going on in Vietnam."

The new decree, however, could have scope for different interpretations in the months ahead, with various laws being reviewed and international trade deals still under negotiation, adding to a regulatory web that has been blamed for slowing some of Vietnam's reforms.

Reuters