Vietnam is popular for its status as an ideal investment and business destination to foreign investors. The country is located right in the heart of Southeast Asia. It also shares borders with the new economic giant China, not to mention its proximity to international shipping routes and other big markets in Asia.
In addition to the strategic location, Vietnam has enjoyed the status of being one of the fastest growing economies not only in Southeast Asia but also in the world. What is more, Vietnam appears to be unaffected by the COVID-19 pandemic, unlike many other countries that have suffered from economic recession. Vietnam is one of the very few countries that are successful in combating the crisis. In the third quarter of 2020, its GDP grew to 2.6% year-on-year.
If you need further reasons as to why expand to Vietnam in 2021, read on. This article discusses the top 5 reasons for your Vietnam expansion.
1. Trade agreements
To encourage foreign investments, the government of Vietnam always strives to make it easier and more convenient to do business in the country. One of the initiatives is having a trade agreement, which can also support Vietnam’s economic growth.
Up to the present day, Vietnam has had several trade agreements, such as the Free Trade Agreement with South Korea, the Economic Partnership Agreement with Japan and agreements with countries such as India, China, New Zealand, Australia and Russia.
Some trade agreements just came into effect recently in 2019. They are the EU-Vietnam Free Trade Agreement (EVFTA) and the ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA).
In 2019, Vietnam was the European Union’s largest trading partner, with an import value of 34.4 billion EUR was recorded. Investors from Europe who are interested in expansion to Vietnam can enjoy benefits such as elimination of up to 99% import tax, trade barrier lowering and low-risk trades.
2. Investor-friendly policies
With regard to ease of doing business in 2020, Vietnam ranked 70 out of 190 economies in total, with the overall score of 69.8, according to a report by the World Bank. Some of the reasons are the initiatives implemented by the government, which are mainly related to business capital and taxes.
Vietnam requires no minimum capital contribution in most business sectors, unlike many other countries. Cost-effective and flexible investments, then, can be achieved.
Furthermore, with regard to taxes, the General Department of Taxation in Vietnam has significantly improved its IT infrastructure. Businesses can now settle their tax obligations more easily and quicker.
3. Added investment incentives
Foreign investors can enjoy various investment incentives available in Vietnam. Currently, large-scale manufacturing companies (industry based) with total investment value exceeding 500 million USD or 250 million USD with conditions along with high-tech companies focusing on certain sectors can enjoy tax holidays and lower corporate income tax (CIT).
There is a newly enacted law The Law on Investment 2020 of Vietnam and in accordance with it, starting in January 2021, more industries or sectors will be eligible for tax incentives. The sectors include higher education, medical equipment production and goods production with high value.
Businesses that are set up in areas that are far away from Ho Chi Minh City and Hanoi can enjoy decreased tax rates, tax exemption for between two and four years, and lower CIT for up to nine years, depending on the area.
4. Growing population, young workforce, competitive labour costs
Vietnam’s population is more than 97 million people, or equivalent to 1.25% of the world’s total population. A huge population implies a strong purchasing power, especially when the middle class is also growing.
The majority of Vietnam’s population are made up of people that are as young as 35 years old. The good news is, 97% of the golden population are literate. This means that foreign companies will have no difficulties in finding the right talents with excellent skills to support growth.
In regard to labour costs, compared to other countries in Asia such as Indonesia, China and the Philippines, Vietnam has the lowest monthly minimum wage, with the average of 192 USD. Therefore, Vietnam offers a more cost-effective solution for running a business.
5. Upgraded infrastructure
Upgrading the infrastructure will result in convenient transportation and easy shipping to support ease of doing business, and Vietnam understands this very well. At present, Vietnam has three international airports in Ho Chi Minh City, Hanoi and Da Nang respectively. Vietnam also has several ports, with the most popular ones are Saigon Port and Vung Tau Port. Expressways are also available to cater those who need to travel between regions and neighbouring counties.
There are also several infrastructure projects that are underway or will be implemented in the near future, such as the construction of the 124m My Thuy 3 bridge in Ho Chi Minh City, and the first metro Cat Linh-Ha Dong metro line in Hanoi.
To make your expansion to Vietnam possible, business incorporation is necessary and it starts with company registration. As a foreign investor, it can be a challenge when you have to understand the local regulations and requirements and later take care of the process itself.
Our team of business incorporation specialists can assist you in registering a company, securing the necessary licenses and incorporating your business altogether, making your expansion to Vietnam as smooth and hassle-free as possible.
Discuss your business plan with us. Get in touch via the form below to enjoy a free consultation.