Vietnam was recently ranked 7th in the list of best countries to start a business according to a recent report by UsNews. This ranking is derived from the final outcomes of a global perception-based survey. It takes into account scores from nearly 5000 business decision-makers in a compilation of the following attributes:
- Affordability
- Bureaucratic procedures
- Inexpensive manufacturing costs
- Connectivity with the rest of the world
- Access to capital
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Fast Facts on Vietnam’s Economy
| GDP | POPULATION | GDP PER CAPITA |
|---|---|---|
| $262 Billion | 96.5 Million | $2,715 |
Contributing Factors for Why Vietnam is One of the best countries to do business.
- A Young Population & Educated Workforce: Vietnam has a population of 98.5 million, out of which 70% of people are under the age of 35 years. As a result, the country has the highest rate of labor force participation in Asia at 76%. Moreover, the government also attributes 20% of its annual budget to education. Therefore, Vietnam not only possesses a young and robust workforce but an educated one.
- A Prospering Economy: Despite subsequent lockdowns during the pandemic, the Vietnamese economy still managed to maintain one of the highest growth rates in the world since the start of the said pandemic. Moreover, the world bank has forecasted that by the end of 2022, the country will register a GDP growth of 6.5-6.7%.
- Strategically Great Location: Vietnam enjoys access to shipping routes that are significant for exports and imports, thanks to its huge coastline in the heart of southeast Asia. Moreover, the country’s geographical proximity to commercially-viable countries like China, Singapore, Thailand, and Indonesia makes it an ideal investment spot for iglobal manufacturers.
- Supportive Government Policies: In an effort to foster the inflow of foreign investments in the country, the Vietnamese government strives to provide attractive fiscal and non-fiscal incentives for conducting business in the country. For instance, foreign companies can leverage tax exemption on import duties, corporate taxes, and land use taxes if they invest in healthcare or high-tech sectors deemed essential to the economy.
- Trade Agreements: Vietnam has various trade agreements with many countries, particularly with its Asian neighbors. The country also plays an active role in the ASEAN (Association of Southeast Asian Nations) to facilitate lower intra-regional tariffs. Moreover, to bolster the investments between Vietnam and Europe, the government recently signedt the EU-Vietnam Free Trade Agreement with the European Union.
- Progressing Infrastructure: The Vietnamese government is committed to improving the country’s infrastructure and therefore allocated a big budget for it in recent years. Improvement in infrastructure would lead to more efficient and seamless logistics services within Vietnam. Moreover, this will create new opportunities for foreign investors.
The culmination of all these factors acts as a catalyst in attracting foreign investors to start or expand their business in Vietnam. Apart from having these impressive demographic factors and support from the government, Vietnam is host to numerous untapped investment opportunities that can be effectively capitalized by foreign investors.
Check out our latest detailed guide: How to Set Up a 100% Foreign-owned Company in Vietnam
Latest Investment Opportunities in Vietnam (2022 update)
- Young & Vibrant Fashion Industry: Owing to its expanding middle-class and rise in sophisticated demands, Vietnam’s fashion market clocked an impressive USD 4872 million in 2021.
With the improvement in the standard of living, companies are trying to keep up with the changing demand in the fashion industry by making judicious use of supply chain analysis and deeply studying consumer experience. - Fintech, Leading the Way: Trebling in market size between the years 2017 and 2021, Vietnam has witnessed exponential growth in the fintech sector. The country is home to over 200 fintech companies, providing an array of services like wealth management, mobile payments, and blockchain, among others.
- Thriving E-commerce Sector: According to a survey by Facebook and Bain & Company, Vietnam is destined to be the fastest-growing e-commerce sector in SEA by the year 2026. Factors like the growing middle-class population and easy access to the internet will aid in driving growth for the e-commerce industry.
- Burgeoning F&B Sector: As per a report by Business Monitor International Ltd, Vietnam has transitioned to one of the most lucrative foods and beverage markets in 2019. Moreover, in the year 2020, the sector accounted for 15.8% of the country’s GDP and generated an income of USD 42 million.
- Bright Prospects in Renewable Energy: According to The Diplomat, Vietnam Electricity (EVN) sold 209.4 TWh of electricity in 2019 and the consumption has been surging at 11% per year. Moreover, Vietnam is gaining attention from global investors as the country is committed to achieving carbon neutrality by mid-century.
To combat the threats posed by global warming and climate change, Vietnam has pledged to gradually limit the use of coal-fired power and put curbs on setting-up new plants.
Read More: Vietnam Business Opportunities 2022 & Beyond
Invest in Vietnam: Understanding Tax Incentives
To shore up the inflow of investments in the country, tax incentives play a significant role and are recognized as one of the most appealing facets of doing business in Vietnam. Both international and local investors are granted two types of Corporate income tax (CIT) incentives by the central government – preferential tax rates and tax holidays.
- Preferential Tax Rates: Under this incentive, companies are allowed to pay lower CIT (corporate income tax) rates than the standard 20%. Depending on the project and its tenure, the preferential rates could be 10%, 15%, or 17%*.
- Tax Holidays: It is referred to a pre-defined period in which a business opt not to pay CIT or pay 50% of the tax liability*.
Conclusion
Blessed with abundant natural resources, a young population, political stability, strategic bilateral ties accompanied with robust economic performance, makes up a perfect fusion for foreign businesses looking to make the best use of investment opportunities in Vietnam.
Reach out to the Cekindo Team for help with market entry services, including tax advising, company registration, corporate outsourcing services, etc.
