What Foreign Investors Should Consider to Open a Business in Vietnam

In the context of integration and globalization, the number of foreign investors whom wish to make investment and open a business in Vietnam has increased due to the attractiveness of the business environment.

Business considerations to open a business in Vietnam

Foreign investors often consider Vietnam an attractive destination to register businesses for several compelling reasons:

1. Robust Economic Growth: Vietnam has experienced consistent and robust economic growth over the past few decades. It is one of the fastest-growing economies in Southeast Asia and offers ample opportunities for foreign investors to tap into a growing consumer market.

2. Favorable Demographics: Vietnam boasts a young and increasingly affluent population, making it a promising market for various industries, including consumer goods, technology, and services for investors to open a business in Vietnam.

3. Strategic Location: Vietnam’s strategic location in Southeast Asia provides easy access to other fast-growing markets in the region, including China, Thailand, and Singapore. Its proximity to major shipping routes is also advantageous for trade.

4. Investment-Friendly Policies: The Vietnamese government has implemented a range of investment-friendly policies, including tax incentives and preferential treatment for foreign investors in specific sectors. These policies aim to attract foreign capital and technology.

5. Bilateral and Multilateral Trade Agreements: Vietnam has signed numerous trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), which offer preferential trade terms and access to a broader market.

6. Skilled and Cost-Effective Labor: Vietnam’s workforce is known for its relative affordability compared to some neighboring countries. It also boasts a pool of skilled and diligent labour, making it an attractive location for manufacturing and outsourcing operations.

7. Infrastructure Development: The Vietnamese government has invested significantly in infrastructure development, including transportation, logistics, and energy. These improvements enhance the ease of doing business and connectivity within the country.

8. Political Stability: Vietnam has maintained political stability for many years, providing a secure environment for foreign investment. The government’s commitment to economic reform and openness to foreign participation adds to this stability.

9. Supportive Investment Agencies: Local investment promotion agencies provide assistance and support to foreign investors in navigating the investment process.

10. Diverse Investment Sectors: Vietnam offers investment opportunities across various sectors, including manufacturing, technology, agriculture, tourism, and renewable energy. This diversity allows investors to choose sectors that align with their expertise and interests.

11. Growth of the Middle Class: The rising middle class in Vietnam is driving increased consumer spending, creating a demand for a wide range of products and services.

12. Improving Business Environment: Vietnam has made efforts to improve its business environment, streamline administrative procedures, and reduce bureaucracy to make it easier for foreign investors to open a business in Vietnam

13. Access to Global Value Chains: Vietnam’s participation in global value chains, particularly in electronics, textiles, and manufacturing, makes it an attractive destination for companies seeking to integrate into these supply chains.

14. Tourism Potential: Vietnam’s natural beauty, rich cultural heritage, and historic sites contribute to its growing tourism industry, attracting foreign investment in hotels, resorts, and related services.

15. Green Energy Initiatives: Vietnam is increasingly focusing on renewable energy projects, presenting opportunities for foreign investors in wind, solar, and hydroelectric power to open a business in Vietnam.

Vietnam’s strong economic growth, favorable investment policies, strategic location, and diverse opportunities across various sectors make it an appealing choice for foreign investors looking to open a business in Vietnam and expand their businesses in Southeast Asia. However, it’s essential for investors to conduct thorough market research, understand local regulations, and seek professional legal advice in Vietnam to navigate the complexities of the Vietnamese business landscape successfully.

Legal considerations to open a business in Vietnam

To open a business in Vietnam, however, foreign investors must meet the requirements of Vietnam and international treaties to which Vietnam is a party.

Firstly, the field in which foreign investors wish to conduct business must not be on the list of industries that have been denied entry to the market for foreign investors or are prohibited from doing so under the Law on Investment.

Secondly, foreign investors may be restricted to the percentage of charter capital ownership in some economic organizations.  For example, foreign investors ownership could only be up to 30% of charter capital of a commercial bank in Vietnam.  Limiting the amount of charter capital is indirectly restricting the management and control rights of investors. Instead of freely making policies or decisions, foreign investors have to depend on other members of the company, namely domestic investors. The investors are suggested to consult with corporate lawyers in Vietnam or banking and finance lawyers in Vietnam for specific details in the specialized area like banking or finance.

Thirdly, foreign investors must consider the type of business they want to register. A foreign insurance enterprise, for example, may operate in Vietnam as an insurance limited liability company or as a branch of a foreign non-life insurance enterprise.

If the investor registers the establishment of an enterprise that is not under Vietnam law and the international treaties that Vietnam has signed, the application for registration is considered invalid.

In addition, each type will also have certain limitations. For example, setting up a joint stock company might not be suitable for all investors. In the governance of a joint stock company, the decision-making process is complicated and time-consuming with different sequences and procedures.

Finally, the Vietnam law also have requirements on the legal status, financial status, and competence of investors in certain professions. To open a business in Vietnam, foreign investors must meet all the prescribed conditions.

In conclusion, the foreign investors would need to undertake the legal research into the business it wish to register in Vietnam, and make strategic decision considering the legal and business requirements to maximize the benefits Vietnam would bring to open a business in Vietnam.

About ANT Lawyers, a law firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi,  and Danang, and will help customers in doing business in Vietnam.