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A Q&A Guide to Invest in Vietnam.

Investing in Vietnam is more attractive now, but it also comes with challenges. This Q&A will offer you an overview of the foreign investment environment in Vietnam. So you can determine if Vietnam is the right place for your business expansion.

Can Foreigners Invest in Vietnam?

The answer is YES. Any qualified foreign individual or company is allowed, protected, and encouraged to invest in Vietnam, which offers many diverse opportunities for international businesses eager to invest.

6 Reasons to Invest in Vietnam

Vietnam might offer foreign investors a plethora of strategic advantages. Some of these strong points include but are not limited to:

1. Vietnam’s economic outlook is positive and has huge potential

Before the Covid – 19 Pandemic, Vietnam had steady economic growth with recent annual GDP of around 6 – 7%. Even in 2020, when the Pandemic broke out all over the world, the growth was still high at about 2.91%, which only a few countries in the world have achieved.

A recent Asian Development Outlook Report by the Asian Development Bank forecasts that the country’s GDP will grow by 3,8% in 2021 and 6,5% in 2022.

According to the PWC’s World In 2050 Report, Vietnam could be among the Top 20 economies in the world and Top 10 in Asia by 2050. The average real GDP growth of the Country could reach 5.1% p.a. between 2016 and 2050.

In conclusion, even as Vietnam has rapidly developed a strong, resilient, and sustainably growing economy, future economic forecasts predict even more accelerated growth due to a large amount of untapped potential, leaving massive opportunities for foreign development in the coming decade.

2. The Vietnamese Government supports Foreign Direct Investment (FDI)

Political stability is a huge advantage that helps Vietnam to persevere and consistently implement long-term economic development policy.

The State of Vietnam consistently considers “the FDI economic sector as one of the important driving forces for economic development, promoting international cooperation and participating in global value chains”. This view is further confirmed in the Document of the 13th Party Congress: “The FDI sector is an important part of Vietnam’s economy, playing a big role in attracting investment capital, modern technology and management methods, expanding export markets”

The Vietnamese Government has committed to improving the attracting foreign investment policy; actively creating a favorable, open, competitive investment environment that abides by the high international standards set forth in the new generation of Free Trade Agreements.

Foreign investments are protected by the Vietnamese government through the mechanisms specified in its Investment Law such as:

  • Guarantee of property ownership
  • Guarantee of business investment activities
  • Guarantee of the right to transfer assets of foreign investors going abroad
  • Guarantee of investment in case of changing laws

In addition, eligible foreign investment projects can enjoy investment incentives including:

  • Corporate income tax incentives
  • Exemption from import tax on goods imported to create fixed assets; raw materials, supplies and components imported for production in accordance with the law on import and export tax;
  • Exemption or reduction of land use levy, land rent, and land use tax.

3. Vietnamese – Based Businesses Offer Huge Benefited from Many FTAs

As of early 2020, Vietnam is leading the world in having the most Free Trade Agreements (FTA). Being a member of FTAs is an extremely important factor that continues to encourage investment capital to steadily flow into Vietnam. These main benefits of being a member of an FTAs are:

  • They significantly reduced tariffs imposed on Vietnam’s imports and exports to major markets in the world such as the US, Europe, China.
  • They promote administrative reform;
  • They remove barriers to entry

4. Golden Population and Competitive Workforce

In 2021, the total Vietnam population is more than 98,3 million. Vietnam has a growing educated workforce and is now in a period of “golden population structure” where 67,8% of the population are between the ages of 15 – 64. The labor force in Viet Nam is cost-competitive, educated and increasingly skilled. This offers greater value and serves as an ideal production base for companies thinking of shifting or diversifying out of larger economies.

A research report by World Data Lab, UK recently indicated that Vietnam will have 23.2 million more middle-class residents by 2030. At the same time, Vietnam will is set to improve significantly in rankings in the top 30 markets with the largest consumer class in the world. The rise of the middle class in Vietnam, will no doubt be a huge potential market for businesses to find opportunity in. (More positive than exploit)

5. The World’s Next Hub of Manufacturing?

A recent trend has emerged with large-scale multinational companies such as Foxconn, Samsung, Intel, LG looking to diversify their supply chains into other regions around Southeast Asia, Vietnam being top of the list.

As a result of the international communities dissatisfaction with Chinese business practices, Vietnam has risen to the challenge and has proven itself ready to assist foreign businesses seeking to establish new production facilities at a fraction of their previous manufacturing cost.

To prepare for the post-Covid investment wave, the Vietnamese Government is actively in:

  • Reviewing the industrial park land fund;
  • Promoting a wide disbursement of public investment capital;
  • Setting up a special government agent to welcome “eagles” to invest in Vietnam;
  • Building action programs to train human resources to meet rising demand;
  • Building an increasingly favorable legal framework with an open and transparent mechanism

6. The Governments Active Responses to the Covid – 19 Pandemic

Responding to the negative financial impact as a result of its nationwide challenges, the Vietnamese Government has worked aggressively to remove the difficulties businesses face by taking the following measures:

  • A mass vaccination campaign to achieve heard immunity by early 2022
  • Gradually opening the economy
  • Offering appealing conditions for those who have already been vaccinated to enter Vietnam
  • Exemption and reduction of interest rates and fees including arising debts; etc.

The Government has prioritized its commitment to assist businesses to overcome these difficulties and bring the country back to a “new normal” soon, so that Vietnam remains a safe and attractive investment destination for foreign investors.

What challenges to consider if I invest in Vietnam?

There are certainly a host of challenges when investing in Vietnam that every international investor should take into consideration:

1. Complicated Legal Frameworks

Vietnamese Bureaucracy is cumbersome, complicated, overlapping, difficult to understand, difficult to apply, and easy to violate without detailed and careful guidance from experts. According to statistics, there are about 25 legal documents under the law governing the field of foreign investment and business in Vietnam.

2. Verbose Licensing Procedures

  • The roadmap for implementing licensing procedures is lengthy, especially for large-scale projects
  • Many additional licenses arise during project implementation
  • Complicated customs procedures
  • Enterprises must work with many focal points of state management authorities

3. The Government Constantly Changes its Mind in Attracting New Generation FDI policy

Instead of attracting FDI at all costs, the Vietnamese Government switches its focus on selective attraction, targets to new generation FDI projects with modern technology, environmental friendliness, pervasive power in the economy.

On the contrary, most FDI projects consume lots of energy, cause shortages of natural resources, are often not environmentally friendly, utilize outdated technology, and will not be received with a warm welcome to Vietnam.

4. Unpredictable Covid – 19 Situations

The Covid – 19 Pandemic has had a massive negative impact on the global economy, and Vietnam is no different. When considering whether or not to invest in Vietnam during these unprecedented times, a foreign investor should carefully consider the following potential challenges:

  • Travel Restrictions
  • Service and production interruptions
  • Supply chain disruption and delays
  • Reduce consumer demand due to loss of savings exhausted during Covid

Learn more about Why Doing Business in Vietnam is Difficult and How to Mitigate Risks in this Article.

Doing business in Vietnam is difficult

How to Invest in Vietnam?

Here are the 5 forms of foreign investment in Vietnam, according to Article 21 of the Law on Investment 2020:

  • Establish a new economic organization, such as: opening a new company
  • Capital contribution, share purchase, purchase of contributed capital
  • Implementation of investment projects
  • Investment in the form of Business Cooperation Contract (BCC)
  • New investment forms and economic organizations according to the Government’s regulations

Among all, the establishment of economic organizations, in specific, starting a company in Vietnam is the most common form for foreign investors.

how to start a business in Vietnam

What are the Best Investment Opportunities in Vietnam?

Choosing which industry to invest in, of course, depends largely on the specific needs and capacity of the investor. However, understanding recent investment trends might help an investor utilize and leverage the best advantages Vietnam has to offer. In terms of investment capital size, the top 5 industries that attract foreign investment are currently:

  • Manufacturing and Processing: 11,8 billion USD
  • Electricity production and distribution: 5,5 billion USD
  • Real Estate: 1,7 billion USD
  • Wholesale and Retail Business, (aka Trading Companies): 750,6 million USD
  • Warehouse and Transportation: 744,6 million USD

For small businesses, check out: 9 Promising Business Opportunities in Vietnam for Foreigners

Where Should I Invest in Vietnam?

In order to make the right decision, you should begin by asking yourself the following questions:

  • What type of business am I looking to conduct?
  • What geographic location will offer me the most advantages?
  • Will my business operations be in one city or multiple locations?

From a strategic perspective, it is wise for foreign investors to narrow their focus to large cities that offer convenient infrastructure and an educated workforce, which are most easily found in Ho Chi Minh City, Hanoi, and Bac Ninh.

If you are able to answer the preliminary questions above, we will begin to understand your specific goals and be able to help you navigate this best decision to achieve your desired result.

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Which Countries Invest Most in Vietnam?

According to the statistic for the period January to September 2021, here are the top 5 countries that invest most in Vietnam based on capital investment size:

  • Singapore: 6,2 billion USD
  • South Korea: 3,9 billion USD
  • Japan: 3,2 billion USD
  • Mainland China: 2,4 billion USD
  • Hong Kong: 1,9 billion USD

Top Countries Invest in Vietnam data