Vietnam used to be a low middle-income country until the country got its social and economic achievements after the 1986 Renovation and a series of participation in international organizations like ASEAN. Throughout the years, you may be impressed by a new Vietnam in terms of the business environment. It is now an attractive investment location and promised land for foreigners starting a business in Vietnam.
Vietnam is located in the center of ASEAN and is one of the most prospective economies in Southeast Asia. It is also worth noting that it shares borders with the Pacific Ocean, Gulf of Thailand, Laos, Cambodia and China, providing Vietnam with favorable conditions for domestic shipping and 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.
Vietnam’s free trade agreements (FTAs)
To speed up the country’s integration into the global economy, Vietnam has been actively entering into a range of free trade agreements, both collective and bilateral agreements. Currently, Vietnam has built diplomatic relations with nearly 190 worldwide countries and signed around 16 FTAs with key trade partners! Vietnam’s joining in various free trade agreements has created strong motivations for foreign investors from developed countries to put their first step into Vietnamese markets.
In recent years, the legal landscape for doing business in Vietnam has changed significantly with the introduction of new laws in Vietnam, including the key laws on enterprise and investment. These developments are underpinned by the Government’s continuing commitment to encouraging investment and further integrating Vietnam into the international market. Investors can enjoy the above incentives by investing in preferred industries. The Vietnamese government also offers incentives to businesses set up in certain locations.
Vietnam offers a variety of tax benefits for entities doing business in its country. New investment projects can enjoy tax incentives based on the sector, location and size of the project conducted. Business expansion projects meeting specific conditions as per Vietnam regulations can also be granted CIT incentives.
Competitive labor cost
The cost of starting a business in Vietnam can be a matter of concern to most foreign investors. Among key cost-related factors, it is good to know that Vietnam offers a fairly low labor cost!
Vietnam is structured with a young population and potential workforce. Remarkably, the country’s average wage cost is much more competitive than those of neighboring countries like China.
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.
In the context of the recent China – US trade tension, a large number of foreign manufacturers are also likely to seek another option of the market, which obviously paves the way for Vietnam spot on.
Young and educated workforce
Foreign investors might also benefit from the growth of the Vietnamese population. The third largest populationin South East Asia is relatively young. 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. This vast, well-educated, and relatively cheap workforce has become one of the Vietnamese major assets.
Vietnam’s literacy rates are over 90 percent and one of the highest Internet penetration levels in Southeast Asia. Foreign investors are taking advantage of its technological awareness, the solid entrepreneur community, and the country’s general openness to new ideas.
Vietnam economy is Asia’s shining star during Covid
Vietnam has minimised the economic damage from Covid-19 and is the only country in South East Asia on track for growth this year. Its economy is expected to grow 2.4% this year. Being able to bounce back quickly has made Vietnam even more attractive to investors. The government of Vietnam has shown that it has the ability to handle crises. Therefore, foreign investors can be assured of a stable and sustainable business environment.
Over the years, Vietnam has especially become competitive in its industrial and manufacturing sectors. Once among the smaller economies in ASEAN, Viet Nam has made great strides towards economic modernisation, emerging as a manufacturing powerhouse and a promising hub for services industries. According to InvestAsian, “Vietnam’s stock market has been on investors’ radars for a while.” In the future, Vietnam is predicted to grow stronger and stronger.