As a fast and emerging market with stable economic growth and governance, Vietnam is known as a promising land for foreign investors and companies willing to expand their businesses. Nonetheless, before visiting or creating a business operation plan for your company in the country, it is important for any foreign businessman to understand the history, the state of the economic growth, the politics, the society, and the people. Here are some key highlights that could help you to have an overview of the current Vietnam market in 2022.
1. A strategic location making Vietnam the ideal ASEAN Hub
Vietnam occupies the east coast of peninsular Southeast Asia and shares land borders with China to the north and Laos and Cambodia to the west. This coastline provides direct access to the Gulf of Thailand and the East Sea, and allows itself to develop an infrastructure system, logistics service, and serve domestic trade with Southeast Asia, Asia, and globally.
The country also has a beautiful coastline of 3,444 km with around 114 seaports (the three largest ones are in Hai Phong (North), Da Nang (Central), and Saigon (South), which is an ideal condition for developing the maritime industry, commerce, tourism in particular and also become one of the bustling shipping centers of the world in general.
Moreover, the convenience in air transportation is also a key factor forming Vietnam’s favorable geographical position. It only takes nearly 2 hours by flight from Hanoi and Ho Chi Minh City to travel to 3 of the world’s largest airports including Singapore, Hong Kong, and Kaohsiung (Taiwan). Not only that, the capitals of all ASEAN countries (except Jakarta – the capital of Indonesia) are only 2 hours by flight from Ho Chi Minh City. Southern China, the country’s most economically developed region, is also within a 2-hour flight from Hanoi.
Even if you are thinking about making transportation of goods by road freight transport, Vietnam also has the advantages to do so as it is located on the Trans-Asia Railway route. The road is considered as one of the key transport projects of ASEAN to promote strong economic, cultural, and tourism development of the ASEAN countries while opening a trade route that connects China with Southeast Asia, the Middle East, and Europe.
2. A strong infrastructure development plan for the future
Over the decades, Vietnam has been one of Asia’s fastest-growing countries, with an average GDP growth rate of 6.8% between 2016 and 2019. Recognizing this, the Vietnamese government has prioritized the development of high-qualified infrastructure and plans to construct various expressway projects.
Accounted till November 2019, the whole country counts 336 PPP (Public-private partnership) projects that have signed contracts, of which 140 projects apply BOT (Build-Operate-Transfer) contracts, 188 projects apply BT (Build-Transfer) contracts and 8 projects apply different types of contracts. Total capital mobilized for investment in developing the national infrastructure system reached about 1.6 million billion VND (~ 69 trillion USD). The PPP projects have been deployed throughout the country in recent years, contributing to improving the quantity and quality of transportation, energy, urban infrastructure, wastewater, and waste treatment systems, etc.
Vietnam currently places a high priority on large-scale transport projects such as Long Thanh International Airport, the 1,300 kilometers North-South Expressway, the 235 kilometers Nha Trang – Phan Thiet Expressway, and the 200 kilometers Dau Giay-Lien Khuong Expressway, which are currently under construction and open up many investment opportunities and business development for foreign investors.
3. A stable political system serving economic growth
In the region where Vietnam is located, the political system of some countries is still fragile and the economy is unstable. Unlike those countries, Vietnam benefits from a stable government and social structure, making it an ideal location for capital investment. After 40 years of peace and development, Vietnam has now become one of the reliable investment destinations of many countries due to its stability and political consistency.
As you might know, Vietnam is a single-party state governed by the Communist Party of Vietnam (CPV). The policy is set by the Party Congress every five years and is adjusted twice a year by plenary meetings of the Central Committee. The government and other state agencies are responsible for the implementation of the policy. The National Assembly has the power to pass and amend the Constitution and Laws, to decide on important national issues (domestic and foreign policies, socio-economic, political, security, and operational activities of government agencies), and to monitor all activities of state agencies.
By conducting the one-party state system, safeguarding territorial integrity, and maintaining social order, the government’s main aim is economic growth. With a 5-year socio-economic development plan for the period 2021-2025, with the goal of fast and sustainable economic growth, Vietnam will be a developing country with modern industry by 2025.
4. A country fostering international trade
While in the first period of Doi Moi (1986 – 1990), the average annual GDP growth was around +4.4%, five years later, the country recorded a double increase in the average GDP, reaching +8.2% per year. The subsequent periods reached a high GDP rate with an average of +6.8% increase in the period 2016 – 2019. Although in 2020, the economy is heavily affected by the Covid-19 epidemic, Vietnam’s GDP growth rate is still among the highest growth countries in the region and the world with +2.9% according to the World Bank. According to NCIF (National center for Socio-economic information and forecast), in 2021, Vietnam’s economy will grow from 6.17 to 6.72% and in the next 5 years, the growth rate will maintain at 6.3 – 6.8% per year.
Furthermore, Vietnam is always open and encouraged to welcome foreign investors by regularly updating and adjusting the investment regulations. The country continues to implement preferential policies to attract foreign investors such as corporate income tax exemption and reduction, import tax exemption for a number of categories, exemption and reduction of land rental and use fees, etc. The Vietnamese Government is also committed to continuing to reform administrative procedures to create all favorable conditions for investors.
Another demonstration of Vietnam’s openness to the global economy is the numerous trade agreements that the country has signed, in order to attract the market throughout recent years. Some of the examples are Member of ASEAN Free Trade Area (AFTA); Vietnam – EU FTA Agreement (August 2020); Bilateral Trade Agreement (BTA) signed with the US; Member of the World Trade Organization (WTO), etc. All these agreements have shown that Vietnam is eager to boost the country’s economic growth and will continue to sign other trade deals with many countries. Since then, Vietnam’s business environment has continuously improved. The recent Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Vietnam – EU (EVFTA) will also propel Vietnam into becoming a competitive business environment.
5. A high-qualified and ample workforce
Vietnam is experiencing rapid demographic and social change. Its population reached 98.1 million in 2021 (up from about 60 million in 1986) and is expected to expand to 120 million by 2050. According to the 2019 Population Census Report, 55.5% of the population is under 35 years old, taking the highest number among countries in the region at similar income levels. Vietnam’s middle class is also expanding, currently accounting for 13% of the population, and is expected to reach 26% by 2026.
Young, highly skilled workers with a good work ethic and a literacy rate of over 90%, Vietnamese are well-educated and ready to serve in skill-demanding industries, such as information technology, pharmaceuticals, and financial services at a more competitive cost than other countries in the region.
Besides an abundant and qualified workforce, labor costs in Vietnam are also very competitive compared to the region as well. Most Vietnamese workers have good working skills and high adaptability to the working environment, while the labor cost is lower than in comparable low-income countries. It is only 5% or 10% of that in industrialized countries. This is one of Vietnam’s competitive advantages over other labor markets in the region, encouraging foreign investors to consider and choose Vietnam as their potential investment destination.
6. A unique culture and people
Vietnam has a unique and long-standing culture associated with the nation’s history of formation and development. It has become attractive for foreign businesses thanks to its harmonious blend of local traditions and the advances in globalization.
Since the culture reflects the values, beliefs, and behavioral norms of the people, it is essential to establish a good, long-term relationship with the Vietnamese before undertaking and doing any business in Vietnam. Also, for those who want to start operations or expand in the country, it is important to learn about the country’s vibrant culture and traditions.
Keep in mind that the Vietnamese attach special importance to personal relationships and prefer to work with those they know and trust. Their business networks often include relatives and peers as nepotism guarantees trust. They only want to expand their networks with partners they can rely on. Moreover, the greetings, the business attire, the business entertainment, the “saving face” custom, or the verbal and non-verbal language, etc. those are all taken into account and definitely some things that businesses should study before showing their presence in the country.
From the booming economy to the fast-growing and skilled workforce, from the stable legal and political structure to the strategic position on the world’s shipping map, Vietnam has shown its growth and promising investment opportunities to the foreign investors and companies, proving itself as a safe and stable destination for those who want to settle in their businesses in ASEAN.
If you are interested in discovering the opportunities Vietnam has to offer, don’t hesitate to get in touch with Source of Asia and subscribe to our monthly newsletter to stay up-to-date with the latest news!