Why Vietnam?

3/7/2021
1. Literate & Competitive workforce
Vietnam has a population of 90.73 million people (13th largest in the world) expected to grow to 100 million in 2020 with an annual growth rate of 1.2%. Over 50% of the population is 25 years or younger. Possessing highly skilled, young workers with an extraordinary work ethic and literacy rate of more than 90%, the Vietnamese are equipped with a high level of education and are prepared to serve in high skilled industries like information technology, pharmaceuticals and financial services, at a more competitive cost than other countries in the region.

The unemployment rate within the labor age group in 1st half of 2020 was 2.26%, of which it was 3.62% for urban area and 1.59% for rural area (in 2019, the unemployment rate was 1.99%). 

The population consists of 54 ethnic groups, of which 88% is Viet (Kinh) and the remaining 12% is ethnic minorities such as the Tay, Thai, Hoa (Chinese), Khmer, Hmong and others. The Government has given priority to developing quality training and education system.

Vietnamese is the official language. The modern written language uses the Vietnamese alphabet, a Romanized representation of spoken Vietnamese.

While English is increasingly favored as a second language, other languages used to a lesser extent in Vietnam are French, Russian, Chinese, Khmer and mountain area languages (Mon-Khmer and Malayo-Polynesian).
2. Economic Strength

Vietnam’s development over the past 30 years has been remarkable. Economic and political reforms under Đổi Mới, launched in 1986, have spurred rapid economic growth, transforming what was then one of the world’s poorest nations into a lower middle-income country. Between 2002 and 2018, GDP per capita increased by 2.7 times, reaching over US$2,700 in 2019, and more than 45 million people were lifted out of poverty. Poverty rates declined sharply from over 70 percent to below 6 percent (US$3.2/day PPP). The vast majority of Vietnam’s remaining poor – 86 percent – are ethnic minorities.

In 2019, Vietnam’s economy continued to show fundamental strength and resilience, supported by robust domestic demand and export-oriented manufacturing. Real  GDP grew by an estimated 7 percent in 2019, similarly to 2018, one of the fastest growth rates in the region.

Given its deep integration with the global economy, the Vietnamese economy has been hit hard by the ongoing COVID-19 pandemic but has shown remarkable resilience. The initial health impact of the outbreak had not been as severe in Vietnam as in other countries due to proactive measures at the national and subnational levels. The macro-economic and fiscal framework remains resilient with an estimated GDP growth rate of 1.8 percent in the first half of 2020, projected to reach 2.8 percent for the year. Vietnam is one of the few countries in the world not to expect a recession, though its growth rate for this year is far less than the typical 6-7 percent pre-crisis projections. However, the impact of the ongoing COVID-19 crisis is hard to predict given the uncertainty surrounding its magnitude and duration. Public financing requirements will increase as the result of lower revenue and higher spending due to the stimulus package launched  to mitigate the negative effect of the pandemics on households and businesses.

Thanks to its strong fundamentals, and assuming the relative control of the COVID-19 pandemic both in Vietnam and the world, the Vietnamese economy should rebound in 2021. COVID-19 has also shown the necessity for stronger reforms to help the economy recover in the medium term, such as improving business environment, promoting the digital economy, and enhancing public investment effectiveness and efficiency, which are some of the key agendas for Vietnam to consider stronger and faster reform actions.

In June 2020, Vietnam’s National Assembly has also passed the amended Law on Investment and Law on Enterprises, both of which will take effect on January 1, 2021. 

The amended Laws simplifies the business registration process, redefines state-owned enterprise (SOE), and excludes household business from the scope of the current law. 

The amended Law on Investment provides updates on conditional business lines, investment incentives, support mechanisms while removing administrative approval for certain types of investment projects.

 
3. Geographic location & Potential Market

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Located in the cradle of Southeast Asia, Vietnam’s advantageous geographic location can serve as a launch pad and home base for what is already the largest collection of people on earth (the combined populations of ASEAN along with China, Japan, South Korea and Chinese Taipei account for over 2 billion people).

Vietnam occupies the eastern coastline of the Southeast Asian peninsula, and shares land borders with China to the north, and Laos and Cambodia to the west. Its coastline provides direct access to the Gulf of Thailand and the East Sea.

Vietnam has a land area of 331,114 square kilometers. Most of the country is hilly or mountainous, with flat land representing only about 20 percent. The primary topographical features in the north are highlands and the Red River Delta and the south includes the central mountains, coastal lowlands and the Mekong River Delta. 

Vietnam has a beautiful long seacoast of 3,444 km, which is an ideal condition for development of maritime industry, trade and tourism in particular and for its emergence as a shipping center for  and the world in general.

Hanoi, the capital of Vietnam, located in the north of the country and Ho Chi Minh City, the largest city in terms of population and economic activity, is situated in the south. Other major cities include Hai Phong, Da Nang, Hue, Vinh, Quy Nhon, Nha Trang, Can Tho, and Da Lat…

Diverse geographical structure together with hills, highlands and coastal areas are suitable for comprehensive economic zones. 
4. Natural Resource
Since it began offshore oil exploration in the 1970s, Vietnam has become a net exporter of crude oil, while gas and petroleum reserves, coal reserves, and the harnessing of hydropower electricity provide other readily available sources of power. 

Minerals located in Vietnam include iron ore, tin, copper, lead, zinc, nickel, manganese, marble, titanium, tungsten, bauxite, graphite, mica, silica sand, and limestone. 

In addition, Vietnam has played a significant role in the exportation of agricultural products to the world markets as the world’s largest exporter of pepper, second largest exporter of coffee and rice, and third largest exporter of cashews, among other products.
5. Open Business Environment
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, WTO... Throughout the years, investors 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 has witnessed an ever-growing increase in its performance for developments. Below are some key highlights to help you visualize the Vietnam business environment in recent years:

  • Vietnam hit a record of 7.08% in the country’s GDP growth rate in 2018,
  • Socio-political and macro-economic stability is a stand-out feature for Vietnam potential business growth,
  • The population of over 97 million people has marked the prospective purchasing power of Vietnam market,
  • Vietnam is among the world’s top factories for supplying electronic items, mobile phone, textile-garments, and other industries,
  • Until the end of 2019, over 30,000 FDI projects selected Vietnam as their home, with total registered capital reaching around US$362 billion,
  • The US-China trade tension is also another factor that contributes to the outperformance of Vietnam among many countries in the region,
  • The EVFTA will eliminate almost 99 percent of customs duties between the EU and Vietnam, expected to be a driving boost to Vietnam’s economy in upcoming times,

In recent years, Vietnam business trends are highly focusing on the private sector, together with the open business environment to attract foreign investors into the Vietnamese market. The country has also affirmed its position as a strong base for IT and manufacturing sectors thanks to its competitive and reasonable labor costs.

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 15 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.

6. Significant improved legal environment
In parallel with Vietnam’s significant efforts to improve its economic growth throughout the years, considerable improvements in its legal and institutional framework have been witnessed as well.

Vietnam’s regulatory system is appreciated by its open business environment, transparent investment policies, together with favorable profit-based incentives for enterprises.

For example, Enterprise Law and Investment Law of 2014 are fundamental laws that govern the incorporation and operation of companies in Vietnam. These laws have standardized individuals’ carte blanche to do business in permitted business areas as well as reduce a broad array of administrative hassle to enterprises.

The private and FDI sectors, among others, have been granted preferable conditions while doing business in Vietnam by virtue of these laws.

Improvements for Vietnam's regulatory regime in relation to its business and investment environment have contributed significantly to Vietnam ranking in the international era. Strikingly, the country was ranked 70th among 190 economies in the World Bank’s Doing Business 2020 report.

Vietnam’s National Assembly recently passed the Investment Law and Enterprises Law (Amendment), which comes into force on January 1, 2021. Such further updates and changes in respective laws are expected to make doing business in Vietnam less burdensome and benefit foreign enterprises investing in Vietnam.
 
7. Active global integration

Before joining to WTO Vietnam had demonstrated continued efforts in achieving high GDP growth, liberalizing its market and transforming its regulatory environment. Vietnam officially became the member of ASEAN and joining the ASEAN Free Trade Area AFTA and officially became the WTO's 150th member of WTO on 11 January 2007.

Vietnam has made major steps forward in its commitments to regional and international economic integration. Following the introduction of Doi Moi Vietnam signed an economic and trade cooperation agreement with the EU in 1995, joined ASEAN in 1995, adhered to CEPT/AFTA in 1996 and became an APEC member in 1998.The Bilateral Trade Agreement (BTA) with the United States was signed in 2000, which resulted in a dramatic increase in the trade volume between the two countries. Vietnam became the 150th member of the World Trade Organization on January 11, 2007 and the country has official joined the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) with other 11 members on 8 March 2018, which is an unprecedented multilateral free trade & investment agreement that aims to further liberalize the economics of the Asia-Pacific region.

Vietnam's commitments in the WTO increase market access for exports of goods and services of WTO's  members and establish greater transparency in regulatory trade practices as well as a more level playing field between Vietnamese and foreign companies. Vietnam undertook commitments on goods (tariffs, quotas and ceilings on agricultural subsidies) and services (provisions of access to foreign service providers and related conditions), and to implement agreements on intellectual property (TRIPS), investment measures (TRIMS), customs valuation, technical barriers to trade, sanitary and phytosanitary measures, import licensing provisions, anti-dumping and countervailing measures, and rules of origin.At present, Viet Nam has established diplomatic relations with 172 countries and signed 55 bilateral investment agreements and 58 double taxation agreements with countries and territories. It has economic and trading relations with about 165 countries and territories. Vietnam holds membership in 63 international organizations and over 650 non-governmental organizations.

The policy of “multi-lateralization and diversification” in international relations has helped Vietnam to integrate more deeply into the global and regional economies and increase trade and investment ties with nations all over the world. More importantly, Vietnam has improved its enable business friendly environment over time.

8. Safe and Stable destination

In a region of the world where some countries remain vulnerable to political and economic instability, Vietnam has benefited from its stable government and social structure, making it an ideal place for capital investment. After 40 years of peace and development, Vietnam has become one of the reliable investment destinations for many countries due to its political stability and consistency. One of the most important factors for FDI enterprises to choose to invest in Vietnam is security.

Vietnam is a one-party state run by the collective leadership of the Communist Party Secretary-General, the Prime Minister (PM) and the President. Policy is set every five years by the Party congress and adjusted twice a year by plenary meetings of the Central Committee. The Government and other state organs are responsible for implementing policy. The National Assembly has the power to approve and revise the Constitution and Laws, make important decisions on national matters (policies on internal and foreign affairs, socio-economic factors, political factors, security factors, operations of state bodies), and supervise all operations of state bodies.

The President, as Head of State, represents The Socialist Republic of Vietnam on internal and foreign affairs. The Government is the highest administrative state body of The Socialist Republic of Vietnam, and responsible for executing and managing political, economic, cultural, social, national defense, security and foreign affairs of the state bodies. Ministries are responsible for the execution of state power in the certain industry or sector. People’s Committee (province, district, and commune) governs management affairs within its administrative location, manages, directs, operates daily activities of local state bodies and executes policies of the relevant People’s Council and higher state bodies.

Recently, Vietnam has been considered a bright spot in ASEAN by investors thanks to its political stability, sustainable economic growth, abundant workforce, large market, increasing per capita income, intensive international integration, competitive incentives, plus its geographical location in the center of Southeast Asia.

Vietnam is home to over 32,000 projects worth USD378 billion from 136 countries and territories. While countries in the world are still fighting against Covid-19, Vietnam has already resumed business activities normally and become one of the first nations to diversify the supply chains. Foreign investors therefore are considering Vietnam a potential investment destination in the post-Covid-19 period.

A survey from the Japan External Trade Organization (JETRO) in February 2020 showed that over 63% of Japanese businesses in Vietnam plan to raise investment, the highest rate in ASEAN.

9. Supportive Government Policy
Attracting foreign direct investment (FDI) has always been a key part of Vietnam’s external economic affairs. Vietnam already has many comparative advantages and a strong investment climate, but the country is working hard to become even more appealing to foreign investors by vigorously renovating the business and investment climate, and by recognizing that the FDI sector is an integral part of the economy – essential to restructuring the economy and raising national competitiveness.

The Vietnamese government is continuing to revitalize its business and investment climate. One way it is doing this is its work on three “strategic breakthroughs”: (1) putting in place market economy institutions and a legal framework; (2) building an advanced and integrated infrastructure, particularly transport; and (3) developing a quality workforce. These should all be completed by 2020.

Vietnam views the success of FDI enterprises as its own success. As such, the government is committed to ensuring a stable socio-political environment, protecting the legitimate rights and interests of investors, and creating an enabling environment for FDI enterprises in the country.

In the medium and long term, Vietnam will continue in its efforts to attract and efficiently use FDI inflows to advance socio-economic development. The country will target “high quality” FDI inflows, focusing on FDI projects that use advanced and environmentally friendly technologies, and use natural resources in a sustainable way. It will also target projects with competitive products that could be part of the global production network and value chain.

Of all key duties, the maintaining macroeconomic stability while controlling inflation is vital. To ensure this objective is achievable, the government has asked all government agencies, people's committees and organizations nationwide to pull efforts to carry out their assigned tasks at a high level.

Also, the government has asked the State Bank of Viet Nam to work closely with ministries and central and local government agencies to come up with proactive monetary and fiscal policies to put inflation under the control and stabilize the macro economy so that Viet Nam will achieve a rational economic development growth.

Especially, as Vietnam comes out of lockdown and attempts to recover its economy, the government issued Resolution 84/NQ-CP (Resolution 84) unveiling a number of incentives for businesses affected by the pandemic. The Resolution includes the reduction of certain fees, as well as the easing of various regulations related to trade, industries, and foreign employees. 
10. Success Stories

1. Unilever Vietnam has built up a sterling reputation in Vietnam for its quality consumer goods, the high number of jobs it creates here, and by making a considerable contribution towards the country’s economic growth over the past two decades.

Unilever Vietnam takes great pride in the close and mutually beneficial relationship. It has established commercial relationship with small and medium enterprises (SMEs) over the past few years. Almost 2,000 local SMEs have been working with the company in its supply chain, from raw material suppliers to packaging material producers, to service providers. This expansive supply chain has culminated in over 15,000 jobs throughout the country.

Unilever Vietnam Chairman cheerfully dubbed Unilever Vietnam as “Vinalever”, noting that it was the name he most desired, as it expressed the strong beliefs and warm sentiments that the company had accumulated over the course of more than 20 years operating in Vietnam.

2. Hanel Vietnam is operating in various fields, including electronics, information technology, telecommunications, real estate, logistics, financial investment, labor export...

Daewoo Hanoi opened in 1996 and is one of the famous 5-star hotels in Hanoi, Vietnam. The owner of this hotel is Daewoo E&C Korea Co., Ltd. and Hanel Vietnam. In particular, the Korean group holds 70 percent of capital. In 2012, Hanel Vietnam bought Daewoo Hanoi with the investment of USD100 Million.

3. Lotte Hotel and Resort with the opening of Lotte Hanoi Hotel in 2014, the group aims to become a leading Asian hotel owner.

The USD92 million Lotte Hanoi Hotel is located at the Lotte Centre Hanoi, right next to the Korean-before owned Daewoo hotel or Hanel Daewoo Hotel now.

Lee Jung Youl, general director of Lotte Hotels & Resorts Vietnam cum deputy chairman of Lotte Group said “I believe that it is high time for high-end hotel development in Vietnam, especially the five-star hotel segment, since Hanoi and Vietnam are integrated into the global market and are also attracting a strong flow of FDI, foreign tourists and businessmen, while Vietnam lacks high-end hotels.

Lotte Group expects to see profits from the Hanoi Lotte Hotel within three years of operation.

Lotte is also keeping its eyes open for potential buy-outs in Vietnam. The group paid USD62.5 million to acquire the five-star Legend Hotel Saigon from fund management company VinaCapital.

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