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Advantages of Doing Business in Vietnam

Vietnam is a top investment destination in Southeast Asia, offering many business opportunities. With over 50% of people under 35, Vietnam’s market is set to grow fast. This means big chances for investors and entrepreneurs. A young, skilled workforce is ready to help the country grow.

Vietnam’s wages are lower than its neighbours, attracting foreign investment. The government has made it easier to do business here. For example, electronic VAT returns are now available.

The Corporate Income Tax rate is just 20%, making it a cost-effective place to expand. There are no local income taxes and many Free Trade Agreements. This shows Vietnam’s commitment to being a prosperous, open economy.

Vietnam is expected to outperform Singapore and Sweden by 2036. It offers sustainable growth and great opportunities. Now is the time to explore Vietnam’s market and its many chances.

Introduction to Vietnam’s Economic Landscape

Vietnam has worked hard to move from being mainly an agricultural society to a key industrial player. This big change has helped it grow economically and connect with the world. By focusing on industrial growth and trade, Vietnam aims to increase its global influence.

From Agrarian Roots to Industrial Powerhouse

Once mainly focused on farming, Vietnam has quickly become a major industrial force. This shift shows Vietnam’s strong commitment to industrial growth. The country’s rise in business rankings, like those by the Economist Intelligence Unit (EIU), highlights its success. This is thanks to its smart use of technology and global trade.

Government’s Commitment to Global Integration

The Vietnamese government is fully dedicated to joining the global economy through trade agreements. These efforts make it easier for foreign companies to invest. Better policies and infrastructure make Vietnam an attractive spot for businesses in Southeast Asia.

Advantages of Doing Business in Vietnam

Vietnam is a rapidly growing nation with great opportunities for business. Its strong economic growth and supportive government make it attractive. The country has a young population, lots of tech talent, and an affordable workforce.

Economic Growth: Vietnam’s GDP has grown faster than many countries, with a 5% growth last year. It aims to grow even more in the future. This shows it’s a great place for businesses.
Vietnamese Demographics: About half of Vietnam’s nearly 100 million people are under 30. This young workforce is full of energy. Generation Z will soon make up a third of the working-age population, adding to the market’s vibrancy.
Tech Talent: Vietnam values education, with a 97% literacy rate among the working age. It has around 400,000 engineers and 50,000 IT graduates every year. This makes it a great place for tech businesses.
Affordable Workforce: Setting up IT teams in Vietnam can save 15-50% compared to countries like Thailand and Malaysia. It’s a cost-effective option for tech companies.
Government Incentives: Vietnam is part of 17 Free Trade Agreements, making it easier to access markets. The government also aims to be carbon neutral by 2050. This opens up new opportunities in green technologies.

Thinking about starting or growing your business in Vietnam? Look at these points closely. The government’s support, a growing economy, and a skilled workforce make it easier to enter the market. They also promise long-term growth.

Growing Economy and Transformation Policies

Vietnam’s economy is growing strong, thanks to smart reforms and policies. The Doi Moi policy has been key in making Vietnam a thriving market economy. It shows how the country can adapt and grow well.

Impact of “Doi Moi” Policy

The Doi Moi policy, started in 1986, changed Vietnam’s economy. It moved from a planned to a market economy. This change opened up trade, brought in foreign investment, and boosted the private sector.

In 2024, Vietnam’s economy grew by 7.09%. The government aims to grow even more, aiming for 8% growth soon. The Doi Moi policy laid the groundwork for this growth, helping Vietnam’s economy keep moving forward.

Resilience During Global Challenges

Vietnam’s economy has shown great strength, even when the world faced big challenges. The country’s past reforms helped it not only keep going but also grow stronger. For example, in the third quarter of 2024, GDP grew by 7.4%.

This shows Vietnam can handle tough times well. It attracts more investment, with over 157,200 new businesses in 2024. This is a sign of the country’s economic strength.

Vietnam is becoming a key player in the economy, thanks to the Doi Moi policy. It aims to reach a per capita GDP of $7,400-7,600 by 2030. This shows Vietnam’s commitment to sustainable growth and resilience.

Strategic Geographic Location

Vietnam sits at the heart of the Indo-Pacific region. It’s not just a spot on a map. It’s key to its growing role as a major logistics hub. It connects easily to global markets and important shipping routes.

This spot makes Vietnam a big player in international trade. It has a long coastline of 3,200 km. This opens doors to Asia’s fast-growing economies.

Vietnam’s location helps it grow fast through better connections and trade. It has direct access to key shipping routes. This is great for businesses wanting to reach big markets.

Places like Cat Lai Port in Ho Chi Minh City show Vietnam’s strong logistics. It’s a big container port in Southeast Asia. This shows Vietnam’s ability to handle modern supply chains well.

Enhanced logistics hub capabilities: Vietnam’s strategic site fosters the development of robust logistic networks which are essential for swift and efficient transport of goods.
Accessibility to global markets: Located centrally in the heart of East Asian trade corridors, Vietnam provides seamless connections to China, Japan, South Korea, and ASEAN countries, critical for sustaining trade flows.
Proximity to essential shipping routes: The availability of multiple shipping routes that pass through Vietnamese waters ensures reduced transit times and better access to international markets.

Vietnam is getting better for businesses, thanks to its efforts. It’s moving up in business rankings. This shows it’s making a good place for companies to work.

Vietnam’s good location helps it a lot. It makes it a key part of the global supply chain. Its exports, worth over USD 371 billion in 2023, show its strength.

Export numbers are going up, by 10.5% from last year. This shows Vietnam is more than just a place to make things. It’s a key link for global trade.

In short, Vietnam’s location is very important. It’s not just a fact. It’s a key part of its economic plan. It helps Vietnam grow and connect with the world better.

Developing Infrastructure in Vietnam

Vietnam is rapidly changing its infrastructure. The government is supporting this change a lot. They want to keep the economy growing and improve technology.

This is important because Vietnam aims to improve its digital and transport systems. They want to support their growing economy and urban population.

Construction Boom and Government Support

The Vietnamese government has started many national projects. These projects are about green energy, waste management, and sustainable cities. They want to invest around USD 16 billion each year in transport.

They plan to make the expressway network longer by 2030. They also aim to have around 400 industrial parks. These plans are to attract more investments from locals and foreigners.

Improvements in Transport and Technology

Vietnam is also making big steps in technology. The government wants 99 percent of the population to have 5G by 2030. They also plan to have more undersea fiber optic cables by 2025 and 2030.

They aim to use Internet Protocol Version 6 (IPv6) across the country. This will help with the digital transformation. They expect the digital economy to grow to $52 billion by 2025.

Vietnam’s Digital Infrastructure Strategy highlights enhancements in telecommunication, internet infrastructure, data infrastructure, and digital utilities.
Every citizen is expected to have one Internet of Things (IoT) connection by 2025, increasing to four by 2030.
The adoption rate of digital signatures is projected to increase significantly, facilitating a more connected and digitally secure society.

These projects show Vietnam’s strong focus on infrastructure. They also aim for a greener, more sustainable approach. This will benefit Vietnam’s economy and people for a long time.

Manufacturing Sector: A Pillar of Strength

The manufacturing sector in Vietnam is a key part of the country’s growth. It supports a lot of economic activity, mainly in the electronics industry. This sector helps Vietnam stand out in the global market.

Investments in Electronics and Manufacturing

Vietnam has attracted a lot of investment in manufacturing, with a big focus on electronics. This has made the country’s manufacturing market worth around €100.50 billion by 2024. The electronics industry is a big part of this, helping Vietnam compete worldwide.

The country is now a key place for making electronics. It attracts big companies looking for good, affordable places to make things.

Vietnam’s manufacturing sector contributes over 20% to the country’s GDP.
Foreign direct investment in the manufacturing and processing sector amounted to about $266.9 billion as of May 2023.
An impressive projected 63% share of total FDI in Q1 2024 is captured by the manufacturing and processing sector.

Competing on a Global Scale

Vietnam’s success in manufacturing comes from more than just investment. It also comes from smart government policies and strong growth.

The electronics industry is very important for Vietnam. It’s a big part of the country’s high-tech imports in the European Union.

Vietnam has the second-lowest operating costs among nine Asian countries, making it a lucrative destination for industrial activities.
The country’s strategic geopolitical position enhances its competitiveness, with 29 out of 39 world maritime routes passing through its waters.

Vietnam is working hard to make its manufacturing base even stronger. This will help it stay competitive in the global market. It will also drive the national economy and attract more global manufacturers.

Skilled but Affordable Labour Market

Vietnam’s labour market is a great example of skilled labour being affordable. It has a vibrant workforce full of highly educated people. This mix attracts businesses looking for a cost-effective way to grow, mainly in tech.

Education and Workforce Dynamics

Vietnam’s focus on education is key to its labour market appeal. About 27.8% of the workforce has degrees or higher. The country also produces around 50,000 IT graduates yearly.

This focus on tech talent is strategic. It meets the global demand for tech skills. Plus, the workforce’s good English skills make Vietnam attractive for outsourcing and tech projects.

Cost-effective Expansion for Businesses

Vietnam is great for businesses looking to expand without spending a lot. The average hourly labour cost is just $2.50. This is much lower than many other places.

But, quality isn’t sacrificed for lower costs. 83% of the workforce is skilled, making operations efficient and productive.

The country’s steady GDP growth and rising FDI show its economic strength. FDI reached $23 billion in 2023. This supports a business environment that offers growth and stability.

Government Policies and Foreign Investments

We look closely at how Vietnam’s government policies attract foreign direct investment. The Vietnamese government has worked hard to make their rules clearer and easier to follow. They offer strong incentives to attract investors from around the world.

Ease of Doing Business Initiatives

Vietnam wants to make it easy for investors to do business there. It follows international standards to make the market more open. The Law on Investment (2020) ensures fair treatment for all investors, with some exceptions.

The government has made it easier to start and run a business. They’ve simplified rules and made things more transparent. This helps make doing business in Vietnam easier.

Legal and Regulatory Enhancements

The rules have been improved, including a Prohibition List. This list shows which areas foreign investors can’t enter, like some in media and education. But, the government has made it easier for foreign investors in many areas.

They’ve introduced new rules, like Decree No. 46/2023/ND-CP. This helps the insurance business and makes investing safer. Vietnam is becoming more appealing to international businesses because of its growth and location.

The focus on improving laws and rules helps keep the business climate good. This makes it easier for new investments to come in. It also helps strengthen Vietnam’s economy.

Emerging Opportunities in the Vietnamese Market

Vietnam’s economy is changing fast, offering many economic opportunities to global investors and businesses. Key growth sectors include advanced manufacturing, clean technology, information and communications technology, and luxury retail.

The country’s GDP is growing, and Foreign Direct Investment (FDI) is flowing in. This shows a lot of business development chances. For example, the tech sector made US$148 billion in 2022, showing huge potential for tech companies.

Luxury retail is also growing fast, expected to hit US$957 million soon. It’s growing at 3.23% each year.

Advanced manufacturing is a key area, aiming to make Vietnam a top tech production hub in Asia.
Clean technology is getting more attention, as the world moves towards sustainable business.
The ICT sector is expanding fast, with an 8% annual growth rate until 2026. It could add US$1 trillion to Vietnam’s GDP.

A growing middle class with more money to spend is boosting various industries. This creates great chances for businesses to enter a lively market.

Legal reforms and free trade agreements are making it easier for foreign investors. This is a great time to invest in Vietnam, with its economic opportunities and market potential.

Free Trade Agreements and Global Integration

Vietnam is actively joining free trade agreements (FTAs) to open up new markets. These agreements are crucial for boosting exports and strengthening trade ties. They help Vietnam connect with the world’s economy.

Vietnam’s Participation in FTAs

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union-Vietnam Free Trade Agreement (EVFTA) are key for Vietnam. Since EVFTA started in August 2020, Vietnam’s exports to the EU have grown by nearly 50%. This shows how FTAs can help Vietnam grow globally.

Impact on Import/Export Businesses

FTAs bring many benefits to import and export businesses. They lower tariffs and make trading easier. This opens up new markets for exports.

Vietnam is part of many FTAs, like the Regional Comprehensive Economic Partnership (RCEP). These agreements help Vietnam trade with countries like Japan and South Korea. In 2019, trade with these countries was around $110 billion.

These agreements help Vietnam grow by giving it access to more markets. They are key for Vietnam’s economic growth and building strong trade relationships.

Expanded market access through FTAs has been shown to improve sourcing and procurement strategies.
Trading partnerships enrich local economies by fostering job creation and technological transfers.
The facilitation of entry into new markets stimulates innovation by introducing Vietnamese businesses to international best practices and new consumer demands.

Vietnam’s active role in FTAs puts it in a good position in the global trade world. It promises more economic growth through better integration and cooperation.

Challenges of Doing Business in Vietnam

Vietnam is a great place for growth and investment, but it has its own business challenges. Knowing these challenges is key for success in the market.

Understanding the Regulatory Environment

In Vietnam, regulatory compliance can be tough. The laws are complex, and changes happen often. This makes it hard for companies to follow the rules.

Getting the right licenses and knowing about foreign ownership limits are big issues. Legal matters are also complex. For example, getting an Investment Registration certificate can take a month.

Navigating the Market’s Complexities

The Vietnamese market is full of market complexities. Businesses need to understand local culture and practices to build trust. About 45% of companies struggle to find skilled workers, which slows down growth.

Also, 60% of new startups find it hard to get money. The market is very competitive, with most businesses being small. This makes it hard to get a foothold.

Dealing with contract enforcement is also a big problem. It can take up to 400 days. Businesses need to plan for these delays.

To overcome these challenges, businesses need good planning, legal advice, and a deep understanding of the market. With careful planning and strategies, companies can succeed in Vietnam.

Incentives for Foreign Direct Investments

Vietnam is making it easier for foreign investors to come and stay. It offers FDI incentives, tax concessions, and startup support. These are backed by investor-friendly policies. The goal is to help investors save money and grow their businesses in Vietnam.

Tax Incentives and Concessions

Knowing about taxes is key for investors thinking about Vietnam. The country has great tax deals. These include:

Low Corporate Income Tax (CIT) rates, starting at 5% for up to 37 years, based on the investment type and sector.
Tax holidays that let businesses avoid CIT for up to four years. Then, they get a 50% tax cut for the next nine years in high-tech zones.
Foreign tax credits and extra tax cuts for hiring women or ethnic minorities can really help reduce costs for businesses.

This smart plan makes starting a business in Vietnam less risky. It also helps businesses make more money in the long run.

Government Support for Startups

Vietnam is very supportive of startups. It offers help to grow businesses from the start. This includes:

A new investment fund for high-tech startups, starting in 2024. It will give much-needed money to eligible startups.
Enterprise support centres that make things like licensing and registration easier. This helps new businesses avoid a lot of red tape.
More FDI in key areas like manufacturing and IT. This shows strong growth and lots of chances for new businesses to succeed.

With strong startup support for both the beginning and growing stages, Vietnam is a top choice for startups. It’s a great place for new businesses to make their mark in Asia.

Cultural Considerations in the Vietnamese Business Environment

Getting to know the business culture in Vietnam is key for any foreign company wanting to do well. It’s important to understand cultural sensitivity and follow local practices. This helps in building strong cross-cultural communication and professional ties. We need to respect and be aware of these cultural norms to make our business plans work.

In Vietnam, business etiquette values hierarchy and formality a lot. When making decisions, there’s often a lot of discussion. This shows the focus on the community over individual goals. It also means being patient and building trust over time is very important.

Business settings in Vietnam expect formal clothes. Men wear dark suits and ties, and women wear skirts or smart dresses.
Gift-giving is a big part of business etiquette in Vietnam. Gifts are wrapped in lucky colours like red or green.
“Saving face” is key in keeping harmony in business talks. It’s important to be careful in negotiations and solving problems to avoid embarrassment.

Also, meetings follow a strict order based on rank and seniority. When exchanging business cards, use both hands and nod respectfully.

In summary, fitting into the business culture in Vietnam means really getting the norms and customs. As we grow our business and partnerships here, being culturally sensitive will help us succeed and build respect.

How to Start Your Business Journey in Vietnam

Starting a business in Vietnam is rewarding for those who invest wisely and understand the local market. You can choose to form a Limited Liability Company (LLC) or a Joint Stock Company (JSC). The journey to market entry requires navigating through company formation and regulatory frameworks.

Getting an Investment Registration Certificate (IRC) takes 15 days after applying. Then, the Enterprise Registration Certificate (ERC) is issued in just 3 working days. Foreigners can own up to 100% in many sectors. You must fund your company within 90 days after getting the ERC.

Vietnam has a competitive 20% corporate income tax and double tax agreements with 80 countries. This makes it a good place for new businesses.

Success in Vietnam depends on understanding its young population of over 87 million. It’s wise to work with local HR and market experts. They can help you with legal, financial, and cultural aspects. With strong GDP growth and a young workforce, Vietnam offers great opportunities for businesses.