Vietnam - Market Entry and Business Opportunities

Vietnam, a vibrant and culturally rich country located in Southeast Asia, boasts a diverse tapestry of characteristics that define its identity and allure. With its capital in Hanoi, Vietnam is home to a population of approximately 98 million people as of 2022, encompassing a myriad of ethnic groups including the predominant Kinh or Vietnamese, as well as significant populations of Tay, Thai, Muong, Khmer, and other ethnic minorities. The country experiences steady population growth, with a growth rate of around 1% in 2021, occupying an area of approximately 331,212 square kilometres. Positioned amidst breath-taking landscapes, Vietnam is bordered by China to the north, Laos and Cambodia to the west, and the South China Sea to the east and south. Its official language is Vietnamese, though various minority languages are spoken by ethnic groups across the nation. The Vietnamese Dong (VND) serves as the official currency, reflecting the country's economic and financial landscape. Vietnam's allure lies in its rich cultural heritage, stunning coastline, lush forests, and mountainous regions, making it a captivating destination in Southeast Asia.

Economic Overview

Vietnam's development journey since the Doi Moi reforms in 1986 is a testament to remarkable progress, transitioning from poverty to a middle-income economy in a single generation. GDP per capita surged 3.6 times between 2002 and 2022, with poverty rates dropping significantly. The agriculture sector, contributing 13 percent to GDP and employing 29 percent of the workforce, has been instrumental in economic growth. Health outcomes have improved, with reduced infant mortality rates and increased life expectancy. Investment in education and infrastructure has yielded positive results, positioning Vietnam for continued growth. Despite achievements, challenges remain, including an aging population, declining global trade, environmental concerns, and the impacts of automation. The COVID-19 crisis exacerbated existing challenges, highlighting the need for policy improvements in various sectors. Vietnam aims for high-income status by 2045, focusing on green and inclusive growth strategies. Adapting to climate change and enhancing infrastructure are crucial steps towards achieving these objectives.

Bilateral Relations between India-Vietnam

India and Vietnam share a long-standing and deeply rooted historical connection, which has evolved into a comprehensive strategic partnership over the years. From India's pivotal role in fostering peace in Vietnam to the establishment of full diplomatic relations in 1972, the bilateral relationship has strengthened significantly. Marked by milestones such as the elevation to a 'Strategic Partnership' in 2007 and a 'Comprehensive Strategic Partnership' in 2016, the engagement between the two nations spans various sectors, including political, defence, agriculture, and commerce. Reciprocal visits by high-level dignitaries underscore the commitment to enhancing cooperation and mutual understanding, paving the way for a prosperous future as they celebrate the 50th anniversary of diplomatic relations.

Taxation

Vietnam's tax system comprises several key components, including Corporate Income Tax (CIT) at a standard rate of 20% with potential preferential rates for specific industries, Value-Added Tax (VAT) with standard and reduced rates, Personal Income Tax (PIT) applied progressively from 5% to 35%, Import and Export Duties, Special Sales Tax (SST) on select goods and services, and Property Tax ranging from 0.03% to 0.15% of property value. These taxes play a vital role in the country's revenue generation and economic management, impacting businesses, individuals, and trade activities within Vietnam's borders.

Financing Business in Vietnam

Vietnam offers a diverse array of financing options for businesses at various stages of development. Established banking institutions like Vietcombank, VietinBank, and BIDV provide traditional loan products, while the growing venture capital scene, led by firms such as 500 Start-ups Vietnam and VinaCapital Ventures, supports start-ups and high-growth ventures. Private equity firms like Dragon Capital and government initiatives such as the Vietnam Development Bank cater to medium to large-scale enterprises, focusing on expansion and strategic initiatives. International financial institutions like the Asian Development Bank and peer-to-peer lending platforms like Tima and VayMuon further contribute to Vietnam's vibrant entrepreneurial ecosystem, fostering economic growth and innovation through accessible financing avenues.

Top 10 Companies in Vietnam – 2022

Rank	Company	Industry	Revenue in 2023 (USD)
1	Commercial Bank for Foreign Trade of Vietnam	Bank and Financial Services	$ 22.07 B
2	Commercial Bank for Investment & Development of Vietnam	Bank and Financial Services	$ 12.37 B
3	Vinhomes	Real Estate	$ 7.77 B
4	Hoa Phat Group	Iron and Steel	$ 7.28 B
5	Petro Vietnam Gas Corporation	Oil and Gas	$ 7.23 B
6	Vingroup	Real Estate	$ 6.83 B
7	Vinamilk	Dairy	$ 6.06 B
8	FPT Corporation	Information-Technology	$ 5.71 B
9	Asia Commercial Bank	Bank and Financial Services	$ 4.38 B
10	Saigon Beer	Alcohol	$ 3.095 B

Business Clusters in Vietnam

• Ho Chi Minh City (HCMC) Metropolitan Area: As the economic hub of Vietnam, HCMC is host to a diverse range of industries including finance, technology, manufacturing, and logistics. Districts such as District 1 and Phu My Hung are known for their concentration of multinational corporations, financial institutions, and technology start-ups.
• Saigon Hi-Tech Park (SHTP): Located in District 9 of HCMC, SHTP is a specialized economic zone focused on high-tech industries such as electronics, telecommunications, and biotechnology. It serves as a hub for research and development, innovation, and technology transfer.
• Hanoi Capital Region: The capital city of Vietnam, Hanoi, and its surrounding areas host a variety of business clusters, including the Hanoi High-Tech Park (HHTP) and the Hoa Lac Hi-Tech Park. These clusters are centres for technology innovation, research, and development, attracting investment from both domestic and international companies.
• Da Nang Hi-Tech Park: Situated in the central region of Vietnam, Da Nang Hi-Tech Park is dedicated to the development of high-tech industries such as information technology, electronics, and telecommunications. It serves as a key driver of economic growth and technological advancement in the region.
• Long Thanh - Dong Nai Industrial Zone: Located in Dong Nai province, adjacent to Ho Chi Minh City, this industrial zone is one of the largest and most developed in Vietnam. It houses manufacturing facilities for various industries including automotive, electronics, textiles, and food processing.
• Bac Ninh Province: Known as the "Silicon Valley of Vietnam," Bac Ninh province is a major centre for electronics manufacturing and technology development. It hosts industrial parks and clusters that attract investment from leading technology companies such as Samsung, Canon, and Foxconn.
• Binh Duong Province: Situated in the southern region of Vietnam, Binh Duong province is renowned for its industrial parks and clusters specializing in manufacturing, logistics, and supporting industries. It is a preferred destination for foreign investors seeking to establish production facilities in Vietnam.
• Phu Quoc Island Economic Zone: Phu Quoc Island, located in Kien Giang Province, has been designated as a special economic zone with a focus on tourism, hospitality, and real estate development. The island's strategic location and natural attractions have attracted significant investment in resorts, hotels, entertainment facilities, and infrastructure projects.
• Quang Ninh Economic Zone: Quang Ninh Province, home to the world-famous Ha Long Bay, has been developing various economic zones and industrial clusters. With its proximity to China and access to seaports, Quang Ninh is becoming a hub for trade, logistics, and manufacturing industries.
• Central Highlands Coffee Belt: The Central Highlands region of Vietnam, including provinces like Dak Lak, Lam Dong, and Gia Lai, is known as the country's coffee belt. This area specializes in coffee cultivation and processing, with numerous coffee plantations, processing facilities, and export businesses contributing to Vietnam's position as one of the world's largest coffee producers.
• Mekong Delta Agricultural Region: The Mekong Delta is Vietnam's agricultural heartland, known for its fertile land and diverse agricultural production. This region specializes in rice cultivation, fruit orchards, aquaculture, and vegetable farming. Business clusters in the Mekong Delta focus on agricultural processing, food production, and export-oriented industries.
• Phu My Power Complex: Located in Ba Ria-Vung Tau Province, the Phu My Power Complex is one of Vietnam's largest power generation hubs. It comprises multiple thermal power plants, gas-fired power plants, and renewable energy projects, supplying electricity to southern Vietnam and supporting the country's growing energy needs.

Starting a Business in Vietnam

Foreign investment in Vietnam can be either direct or indirect. Direct investment involves collaboration with a local partner to establish a company, while indirect investment involves acquiring shares in existing Vietnamese companies. The process begins with securing an Investment Registration Certificate (IRC), reviewed by the Department of Planning and Investment. Approval typically takes 15 days, with exemptions for certain investments. Subsequently, a Business/Enterprise Registration Certificate (ERC) is obtained, which takes about 3 working days. However, projects in "conditional" sectors require additional scrutiny. Compliance with legal requirements and obtaining necessary permits are crucial for successful foreign investment in Vietnam.

Best Locations to Set-Up Business in Vietnam

• Ho Chi Minh City (Saigon): As the economic hub of Vietnam, Ho Chi Minh City offers excellent infrastructure, a large consumer market, and a dynamic business environment. It is home to numerous industrial parks, technology hubs, and start-up incubators. The city's strategic location and well-developed transportation networks make it an attractive destination for businesses across various sectors.
• Hanoi: Vietnam's capital city, Hanoi, boasts a thriving economy and a rapidly growing population. It offers access to government agencies, diplomatic missions, and international organizations, making it an ideal location for businesses seeking to establish connections and partnerships. Hanoi also hosts several industrial zones and research institutions, fostering innovation and economic growth.
• Da Nang: Located in central Vietnam, Da Nang is emerging as a key business destination due to its strategic location along the East-West Economic Corridor and its well-developed infrastructure. The city's favourable investment climate, skilled workforce, and proximity to major seaports and airports make it an attractive choice for businesses looking to expand in the region.
• Hai Phong: Situated near the port city of Haiphong, this industrial hub offers access to international shipping routes and proximity to key markets in Northeast Asia. Hai Phong's strategic location, along with its supportive government policies and investment incentives, makes it an ideal location for manufacturing, logistics, and trade-related businesses.
• Can Tho: Located in the heart of the Mekong Delta, Can Tho is a vibrant economic centre with a strong agricultural and manufacturing base. The city's proximity to major waterways and its strategic position within the Mekong Delta region make it an attractive destination for agribusiness, food processing, and logistics companies.
• Binh Duong Province: Located in the Southern Key Economic Zone, Binh Duong Province is renowned for its well-developed industrial parks, modern infrastructure, and favourable investment climate. The province attracts investments in manufacturing, electronics, and high-tech industries, offering competitive incentives and support services for businesses.
• Dong Nai Province: Adjacent to Ho Chi Minh City, Dong Nai Province is a major industrial centre in Vietnam. It hosts a large number of industrial parks and export processing zones, attracting investments from multinational corporations in sectors such as textiles, footwear, electronics, and automotive manufacturing.
• Quang Ninh Province: Situated in northern Vietnam, Quang Ninh Province is known for its natural beauty, rich cultural heritage, and strategic location near the border with China. The province is experiencing rapid economic development, driven by investments in tourism, infrastructure, and industrial projects such as the Van Don Economic Zone.
• Vung Tau City: Located on the southern coast of Vietnam, Vung Tau City is a prominent port city with a growing economy driven by the oil and gas industry, tourism, and logistics. The city offers excellent connectivity via seaports, airports, and highways, making it an attractive destination for businesses in marine services, hospitality, and logistics.
• Bac Ninh Province: Situated in the Red River Delta region, Bac Ninh Province is a key industrial hub known for its strong presence in the electronics and IT sectors. The province hosts several industrial parks and is home to major multinational companies, making it an ideal location for businesses looking to tap into Vietnam's thriving electronics industry.

Visa and Immigration

• Business Visa (DN Visa): This visa allows foreign nationals to engage in business activities in Vietnam, such as attending meetings, conferences, and negotiations. It can be valid for single or multiple entries and typically permits stays of up to three months.
• Investment Visa (DT Visa): Designed for individuals interested in investing or establishing businesses in Vietnam. It enables exploration of investment opportunities and market research, making it suitable for entrepreneurs and investors looking to initiate ventures in the country.
• Work Visa (LD Visa): Primarily intended for employment purposes but also applicable to individuals involved in long-term business activities in Vietnam. Usually sponsored by an employer or Vietnamese entity, it requires approval from the Department of Labour, Invalids, and Social Affairs.
• E-Visa: Available for citizens of select countries, the electronic visa (e-visa) allows online application without visiting a Vietnamese embassy. While primarily for tourism, it may serve short-term business needs like attending meetings or conferences, with potential limitations on duration and permitted activities.

Vietnam's market entry report highlights its dynamic growth potential and diverse economic sectors, offering attractive opportunities for expansion. However, entering the market requires careful consideration of regulatory complexities and cultural dynamics. Success hinges on understanding local nuances, conducting thorough market research, and forging strong partnerships. While Vietnam presents lucrative prospects, businesses must adapt their strategies to meet evolving consumer preferences and navigate competitive landscapes. With diligence and strategic planning, businesses can tap into Vietnam's vibrant economy and achieve sustainable growth.

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