Vietnam is the third-largest market in Southeast Asia. It also has one of the fastest-growing economies in the world. These are just two reasons why foreign investors want to invest in Vietnam. Below we list the top reasons why you should invest in Vietnam.
1. Strategic location
Vietnam is strategically located in the center of Southeast Asia. It is also worth noting that it shares borders with China. It has a long coastline and is close to many international shipping routes. These make Vietnam a prime location for trading.
Additionally, Vietnam’s major cities are also strategically located. You will find Hanoi in the north and Ho Chi Minh City in the south. Having major cities on opposite ends of the country makes it easy to do business within and outside the country.
But business opportunities aren’t limited to Hanoi and Ho Chi Minh City. There are also many business opportunities in Da Nang.
2. Trade agreements
Vietnam has several trade agreements that make it easy to do business in Vietnam. These trade agreements also promote the country’s economic growth.
Certain trade agreements, like those under the World Trade Organization, make it easier for foreign investors to set up businesses in Vietnam. Vietnam also offers tariff reductions through trade agreements, such as in the case of the Free Trade Agreement with the European Union.
Other trade agreements and relevant memberships include the following, among others:
- Member of ASEAN and ASEAN Free Trade Area (AFTA)
- Bilateral Trade Agreement (BTA) with the US
- Trans-Pacific Partnership (TPP)
- Free Trade Agreement with Japan
- Free Trade Agreement with Korea
3. Doing business is getting easier every year
The World Bank ranked Vietnam 70th out of 190 economies in its Doing Business 2020 report. The World Bank gave Vietnam a score of 69.8, 1.44 points higher than the year before.
A significant area of improvement involves the process to pay taxes. Vietnam’s General Department of Taxation upgraded its IT infrastructure. Because of this, businesses are now able to settle taxes much faster than before.
Investors can expect further improvements in doing business in Vietnam. This is especially true as the government continues to make processes easier.
4. Openness to foreign investment
Many emerging markets have restrictions on foreign ownership in certain industries. However, in Vietnam, most industries allow foreign direct investment (FDI). Additionally, the government made changes to regulations. The government also put incentives in place to encourage foreign investment. Such incentives include:
- Lower corporate income tax rate or exemption from the tax for several industries
- Exemption from import duties on specific goods like raw materials
- Reduction or exemption from land rental or land use taxes
Investors can enjoy the above incentives by investing in preferred industries. The Vietnamese government also offers incentives to businesses set up in certain locations. Our consultants can advise you on how to make the most of the incentives offered to investors. Get in touch with Emerhub and we will help you set up your business in Vietnam.
5. Relatively low setup costs
There are no minimum capital requirements for most businesses in Vietnam. However, you need to present a reasonable amount relevant to your planned business. Your capital must be able to cover costs to set up your business. In addition to that, your capital must also be able to cover operating expenses until your business becomes self-sustaining.
Our consultants at Emerhub can advise you on the cost to set up and operate your business in Vietnam.
6. Stable GDP growth
Vietnam has one of the fastest-growing economies in the world. Due to economic reforms in 1986, Vietnam has seen stable economic growth over the last few decades. In 2000, Vietnam was the 60th largest economy in the world and rose to 44th place by 2019. Projections estimate that Vietnam will be the 20th largest economy by the year 2050.
Since 2000, GDP growth in Vietnam averaged 6.5% every year. In 2020, Vietnam’s economy still shows growth at about 3% despite the pandemic. According to the Vietnam Institute for Economic and Policy Research (VERP), the GDP growth could reach 3.8% by the end of 2020.
7. Infrastructure developments
The Vietnamese government has successfully created an investment climate by implementing and upgrading local infrastructures. The government has contracted international companies to assist in improving and building new infrastructure. For example, the government is improving the railway line that connects Hanoi and Ho Chi Minh cities, and it is expected to invest $921 million to improve the state of the industrial parks. Investing heavily to facilitate movement around and within the country, Vietnam is the ideal place for foreign businesses to set up their Asia Hub.
8. Growing population
Vietnam has the 15th largest population in the world with over 97 million people. Over the last five years, Vietnam’s population increased by an average of 1%. Worldometers predicts that Vietnam’s population will reach 104 million by 2030. Steady population growth indicates a promising future for its labor force.
Population growth also often comes hand in hand with urbanization and economic development. Existing cities will become crowded as rural migrants move there. This will encourage urbanization in other parts of the country.
9. Young and educated workforce
According to Worldometers, the median age in Vietnam is 32.5 years old. Additionally, per the World Bank, about 70% of Vietnam’s population is under 35 years old. Vietnam also has the highest labor force participation rate in Asia at 76% according to Trading Economics.
The Vietnamese government also allocates about 20% of its annual budget towards education. As such, Vietnam has a young and highly educated workforce.
10. Competitive labor costs
Despite yearly increases to minimum wage rates, Vietnam still has one of the lowest labor costs in Southeast Asia’s top emerging markets. In addition to that, minimum wage rates in Vietnam remain less than half of what the wages are in China.
|
Country |
Monthly minimum wage |
|
China |
USD 363 |
|
Indonesia |
USD 287 |
|
Philippines |
USD 332 |
|
Vietnam |
USD 192 |
*Values converted using exchange rates at the time of writing
Due to rising labor wages in China, many manufacturers are looking at markets with lower labor costs. With its low labor costs and a stable yet growing economy, Vietnam is a more cost-effective alternative to China. Many investors are looking into setting up manufacturing companies in Vietnam. Other investors, meanwhile, are moving manufacturing from China to Vietnam.
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