11 REASONS TO INVEST IN VIETNAM

In recent years, Vietnam is rising as one of the most ideal destinations for capital investment, especially if you are looking for expanding your business to Asia or Southeast Asia. Described by the World Bank (WB) as one of the most dynamic emerging countries in East Asia, the process of shifting from a centralized economy to a market economy has turned Vietnam into a meteoric developing country. With impressive growth rates of an average 7% per year, abundant resources, energetic population, incentives and preferential treatment from the State, there are many opportunities for foreign investors in Vietnam. Here are the top 11 reasons why you should invest in Vietnam right now to maximize valuable profits for your business:

1.Critical geographic location

Vietnam is an S-shaped strip of land, geographically located in the center of Southeast Asia, on the East of the Indochinese peninsula. The country possesses an ideal location for international trade with the North bordering China, the West shares borders with Laos and Cambodia, the East and the South borders the East Sea and Pacific Ocean. The long coastline of 3260 km adjacent to the East Sea is close to the main international transportation routes, create the perfect condition for trade activities.

The advantageous geographic location of Vietnam is a gateway to regional maritime economies and is also a gateway to the land-based road transport systems of Southeast Asian and Asian nations, giving Vietnam the access to the most populous region in the world, which accounts for more than 2 billion heads, including ASEAN nations, China, Japan, South Korea and Taiwan.

2.Robust economic growth

Vietnam is one of the fastest-growing countries in the world. In 2019, the country’s GDP grew by about 6,8 percent, maintaining the consistent growth rate of 7% since the last decade, ranking top in the Asia-Pacific region.

Vietnam GDP Annual Growth Rate

In recent years, the nation has been rising as a leading agricultural exporter and an attractive foreign investment destination. Vietnam's key products are: rice, cashew nuts, black pepper, coffee, tea, fishery products and rubber. Manufacturing, information technology and high-tech industries constitute a fast growing part of the economy. Notably, Vietnam is one of the largest oil producers in the region, boosting a self-powered economy for it relies on the petroleum industry for domestic energy consumption and for export.

Given its deep integration with the global economy, Vietnam has been hit hard by the COVID-19 pandemic. Yet, the health impact of the outbreak has not been as severe in Vietnam as in other countries due to proactive measures at the national and subnational levels, as the macro-economic and fiscal framework remains resilient with a reported GDP growth rate of 3.8 percent in the first quarter of 2020.

3.International integration

In the last two decades, Vietnam's economy has witnessed significant progress thanks to the promotion of openness, proactive international economic integration, and active participation in the network of free trade agreements (FTAs).

Currently, Vietnam has signed 13 free trade agreements and another 3 FTAs are ​​under negotiation. Vietnam is now the trade partner with nearly 100 countries in 5 largest market regions in the world: Northeast Asia, Southeast Asia, Europe (both Eastern Europe and Western Europe), America (both North America and South America) and Asia - Pacific. Free trade agreements are expected to be a catalyst for export growth, improve the business environment and especially enhance the attraction of foreign investment into Vietnam.

4.Bustling import – export activities

With almost 4000 km long, the coastline of Vietnam facilitates import, export, transit and transshipment activities not only for Vietnam but also for the regional countries. In fact, 40% of freight traffic from the Indian Ocean to the Pacific is forced to cross the coast of Vietnam before reaching China, Japan and the United States. In particular, after the Kra canal project (Thailand) is completed, goods will go straight through this canal into the Gulf of Thailand and then to Vietnamese waters rather than around Bangkok (Thailand) or Singapore.

The current seaport system of Vietnam is not only a place for Vietnamese goods to export but also a gateway for goods of South China, Southwest China (from Yunnan to the South), Laos, and part of Thailand and Cambodia. Thus, it’s safe to say that Vietnam has the possibility to become a gateway for goods of an entire continent.

5.Ease of doing business in Vietnam

Compared to its direct competitor – China, Vietnam actually ranks better in terms of ease of doing business—ranking 69^th place to China’s 46^th place on the World Bank’s metrics. Vietnam was also among 34 countries that improved the most from 2018 to 2019 on such metrics, most notably regarding:

Starting a business: Lowering the cost of starting a business and publishing notices of incorporation online.

Taxes: Removing the requirement to submit a hard copy of value-added tax returns and lowering employers’ contribution to the labor fund.

Contract enforcement: Publishing judgements given at all levels in commercial cases online.

                                                                                                                                                                                                                    The World Bank

The gradually improving regulatory environment in Vietnam has made operating a local business here easier than ever. 

6.Low establishing cost and competitive labor cost

Unlike many other countries, a minimum capital is not required for most businesses lines in Vietnam. The investors can start a business without a large amount of charter capital in their capacity, it just need to be enough to cover the expected costs of the company. Such low level of capital stock makes every dollar of investment yields big jump in productivity.

Although Vietnam's annual minimum wage is increasing, Vietnam is still a country with low labor costs. The country’s monthly minimum wages in 2019 vary by region from $125 to $180, with the highest rates in urban areas like Ho Chi Minh City and Hanoi. These wages are half of China’s which vary by province from about $140 to $346. Moreover, Vietnam’s minimum wage growth is showing signs of stability. Minimum wages increased by an average of 5.3 percent in 2019, a lower increase than in 2018 (6.5 percent) and 2017 (7.3 percent). It’s no surprise that Vietnam’s low labor costs are one of its most attractive features to the investors.

7.Young and dynamic population

Vietnam’s population reached 97 million in 2018 (up from about 60 million in 1986) and is expected to expand to 120 million by 2050, ranking 13^th in the world and 3^rd among ASEAN countries. Today, with 70 percent of the population is under 35 years of age, with a life expectancy of 76 years, the highest among countries in the region at similar income levels, Vietnam has enormous market potential to make any business investment a profitable one.

Vietnam also performs well on general education as Vietnamese students has a remarkably high scores in the Program for International Student Assessment (PISA), exceeds that of many OECD countries. This performance indicates a talented, well-educated and ambitious population, provides the manpower with low wages for a decisive competitive advantage.

8.Rising foreign investment

Ever since Doi Moi (Renovation, 1986), the amount of FDI inflows Vietnam has been constantly increasing over the years, especially after Vietnam became an official member of the WTO in 2006. As of 2019, there were 126 countries and territories having investment projects in Vietnam, with foreign investment capital reaching 38.02 billion USD. Meanwhile, FDI disbursement also reached more than 20.38 billion USD.

                                                                                                                                                                                                                                                     General Statistics Office of Vietnam

In 2019, foreign investors invested in 19 sectors, of which the investment focused on processing and manufacturing industries with a total capital of 24.56 billion USD, accounting for 64,6% of the total registered investment capital. This field also has a large proportion of new investment projects, expansion investment projects, capital contribution and share purchase. Real estate business ranked second with total investment capital of 3.88 billion USD, accounting for 10.2% of total registered investment capital. Next in line is the field of wholesale and retail, professional activities of science and technology, construction, etc.

9.Supporting government

 

The Government of Vietnam determined that attracting FDI is one of the main missions to develop the country’s economic and increase competitiveness. According to this scheme, the Government has continuously issue new policies to attract FDI projects such as exemption of import tax, reduction of corporate income tax, land lease with preferential prices, and many other investment incentives eligible for investors who carry out business in the field of information technology, high technology, agriculture, environmental protection, infrastructure construction, health service, etc.

The Government also made it clear that there won’t be any discrimination between local and foreign business, which was made principal in the Law on Investment 2014 and the Law on Enterprise 2014, Decree 60/2015 / ND-CP allows foreign investors to invest in more fields than before.

 

10.Progressing infrastructure

The Vietnamese government has stepped up in infrastructure development to be able to entice foreign businesses to set up factories, offices, production chains in Vietnam. Better and modern highways, airports, seaports are the key factors that will facilitate transportation and logistics activities for businesses, help reducing their running cost and create an ideal investment environment.

Aiming to be a leader in the race to develop infrastructure, in recent years, public and private infrastructure spending of Vietnam has averaged 5.7% of the gross domestic product each year, the highest in the Southeast Asia region; countries like Indonesia or the Philippines spend less than 3%, while in Thailand and Malaysia, the spending is less than 2%. In the whole of Asian territory, Vietnam is second only to China who has spent 6.8% of its GDP for infrastructure development. This also create the abundant opportunities for foreign investor to invest in infrastructure construction in Vietnam, so far it is one of the most attractive field on the list and will continue to grow in the future.

11.Stable politics and good international credit

 

Compared to other countries in the region, the politics environment in Vietnam is fairly stable, as it is a one-party state. The Communist Party of Vietnam (CPV) makes strategic decision to support the development of the countries in all major issues. After 45 years of peace and development, Vietnam has proven itself as a reliable place for capital investment due to its political stability and consistency, provides security for the foreign investors.

As a country once come out of the war as one of the world’s poorest nations, the international stance of Vietnam is now highly appreciated by international community. Specifically, in 2019, the North Korea-United States Summit was held in Hanoi – the capital of Vietnam, strengthening the country’s multilateral credentials. Vietnam diplomatic success is also marked by its chairmanship of ASEAN 2020, impressing international parties by its success responding to SARS-COV 2 pandemic with only 328 cases with zero deaths as of June 2020, albeit its 1,450 kilometers of land border with China, the ground zero of the virus.

 

With much efforts, the country has succeeded in ensuring the health of the people, the investment and business environment, making the investors feel secured and welcomed to maintain and expand the businesses in Vietnam.