Setting up A Business in Vietnam
Are you thinking of joining the many companies who are moving, relocating or expanding their business operations to Vietnam? Perhaps you have a business idea and want to join the fast growing & fascinating start-up culture unravelling amongst both Vietnamese natives and expats in this great little country of ours...
A Country Ripe for Business
After years of conflict, hunger and economic sanctions, Vietnam reached a turning point in 1986 when the country implemented the policy of Đổi Mới, or ‘renovation’ with the aim of creating a socialist-orientated free market economy. In 1994, Bill Clinton lifted the 19-year post-war US trade embargo and Vietnam entered the global marketplace.
Today, Vietnam’s 94 million people have experienced huge economic change. The national GDP is now around $180bn – a massive leap from just $6bn in 1990. As of 2017, 24 of the 28 EU nations have invested in around 2,000 projects in the country, with a total registered FDI reaching above $21.5bn. Industry, construction, and services were the major sectors that attracted the majority of EU capital.
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According to Forbes, Vietnam has become Asia’s hottest investment destination with $17 billion in FDI commitments last year alone. Bloomberg recently reported that the current GDP growth of Vietnam is at about 6.8%. This makes Vietnam one of the best performers among the emerging markets in South Asia.
The Vietnamese are incredibly enthusiastic about foreign investment and the opportunities it brings and increased integration into international markets. They are also keen to share their proud culture, traditions and history with foreigners in order to protect their local heritage in a rapidly developing and forward-thinking economy. For this reason, acknowledgement of Vietnamese culture can earn foreigners a lot of esteem.
According to Tomas Svoboda, Head of Cekindo Vietnam - an organisation that provides market entry support to companies and investors entering Vietnam - many businesses are moving here due to competitive wages and a strong working culture. Common types of businesses favouring to operate in Vietnam range from IT to e-commerce, consulting firms, food and health supplements companies, and manufacturers.
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Tomas also says that many companies are moving or expanding operations from China to Vietnam to avoid US tariffs in the US-China trade war and Vietnam’s preferential trade agreements. Another big reason is the rapidly growing domestic market. Vietnam’s GDP is also one of the fastest growing in the world and is expected to double by 2030, creating an increased consumer demand.
Many factories are also finding success here, as producers look to lower the cost of labor and operations. Vietnam is a perfect fit for this as a large number of the population have the skills to work manual labour jobs. It’s not only big businesses making the move to Vietnam however…
This country has a unique start-up culture, great value per dollar, a good climate, and a strong entrepreneurial community. Vietnam is now very much ready for the startup scene and smaller companies are finding a lot of success here for a number of reasons. One is that it’s easier to find investors, as there are many investor-2-business matching meetings and pitch competitions that bring the investor closer to smaller organisations.
Things to Consider
Cultural differences can also be a huge challenge for foreigners doing business in Vietnam, not to mention the difficulty of dealing with the language barrier. Tomas advises finding a reliable local partner and being open-minded to marketing strategy, so you can adapt quickly to the local market. He also says that Vietnam is a strong and popular choice for technology startups and that many international companies know about it.
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Some companies who have struggled in developed countries have very successfully grown their scalable start-ups in Vietnam. With 70% of the Vietnamese population being under the age of 35, Vietnam is young, fast and fun.
One American businessman recently said...
‘I really love the people of Saigon. They remind me of New Yorkers. They are friendly with a healthy dose of scepticism coupled with a fierce work ethic.’
Another entrepreneur said...
‘Saigon is for bootstrappers who want to go somewhere to put their head down, enter into building mode and crank out their product or business. One could easily live on $1,500 a month here and live quite a privileged existence in a city where modern meets old. Local salaries for admins to coders range from $500 - $1500USD/month. Thus, there are a lot of bootstrappers here in Saigon - and in general, the crowd here tends to be more serious and focused on execution.’
One of the major challenges businesses face when moving to Vietnam is understanding local processes and government regulations, which can be confusing. Ngo Nhat Minh, Founder & Attorney-at-law at BLawyers Vietnam, advises foreigners to consider finding good legal council before setting up a new business in Vietnam, especially those in conditional business fields.
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Minh mentions that one area of help business leaders often need is understanding the many overlapping regulations from different state authorities. Understanding the whole picture can be difficult for foreign investors which can impact the strategy and implementation of launching operations here in Vietnam. He also suggests keeping up to date with the legal status as laws tend to change rapidly.
Minh also suggests foreigners be careful before entering deals. Many go well but if they go wrong it can take a long time to gain support for enforcement from local authorities in situations where parties cannot amicably settle disputes.
Minh also suggests budgeting up to 3 months for setting up a foreign invested company in Vietnam. He says that limited liability companies or joint stock companies are the most common choice of foreign investors because they are easier to manage and have more limited liability for debt and other financial obligations.
Another legal area to consider is understanding the labor law and the rights of employees, especially on termination of employment agreements.
All things considered, if you are looking for a place to expand or start your business, Vietnam could be the right destination for you.
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