Starting a Business in Vietnam – Everything You Need to Know

Diversifying Supply Chains

2020 has seen the eruption of the Covid-19 pandemic, exacerbating the economic damage already done by the trade war. Businesses are suffering and unemployment rates are skyrocketing. China being the factory of the world houses the majority of supply chains, however huge blows from both the trade war and coronavirus have led businesses to look for alternative supply chains.

CNBC reported that large corporations like Apple, Microsoft and Google are examining ways to shift their manufacturing to other places and reduce their reliance on China.

China’s Loss is Vietnam’s Gain

Vietnam’s economy has been booming for the last few years. A 7% GDP growth in 2019 and 2018 firmly supplants Vietnam as one of the fastest growing economies in the world.  

Vietnam’s GDP growth has been excellent over the past 4 years. Even with Covid-19 pummelling economies around the world, Vietnam has seen a solid 3.82% growth.

With many companies evaluating their supply chains, the resilience the Vietnamese economy has shown during this pandemic has made it an extremely attractive place to diversify in to. The Vietnamese government’s strong response to Covid-19 has won accolades from the international community, elevating its growing status even higher.

Vietnam’s Charm Offers Business Expansion Opportunities

Vietnam has many advantages and entices for businesses looking to expand:

  • Strong Economic Growth – Continuous strong growth for over a decade has pulled Vietnam from poverty to a low-middle income country. The country is looking at sustained economic growth in the coming decade to push it to become one of the powerhouses in Asia.
  • Young Workforce – The young demographic makeup of Vietnam gives the nation a strong and willing workforce. With the government spending increasingly on education the potential of its people is enormous and the future is bright.
  • Strategic Location – Located next to China, a manufacturing and consumer behemoth, Vietnam has quick access to supplies from its neighbour and entrance to shipping lanes in the South China Sea. Its long coastline makes for perfect trading conditions with nations around the world.     
  • ASEAN Member – Vietnam is part of the third largest trade bloc. As the region grows in importance, Vietnam and businesses in the country will reap the benefits.
  • Business Environment Reforms – A number of amendments have been made for better transparency and to improve ease of doing business. Vietnam’s constant reforms and openness to foreign investment has attracted many big businesses like Nike.
Vietnam’s “Ease of Doing Business” rating has been improving. Vietnam currently ranks 70th in the world with improvements expected in the future.
  • Low Setup & Labour Costs – With no minimum capital requirements, starting a business in Vietnam without large funds is viable. Minimum wages are also at half of China’s, making labour costs incredibly competitive.
Vietnam’s labour costs are generally low compared to other countries in the region.
  • Maturing Manufacturing, Developing Infrastructure & Progressing Logistics – Vietnam has quickly developed, leading to many labelling it the “New China”. The Vietnamese government recognizes the importance of great infrastructure, placing increased funds in ports, roads and railways.

How Vietnam is Battling Covid-19

The Vietnamese government has taken immediate action by introducing its own measures to stop Covid-19 crippling its economy and threatening jobs. Businesses which are experiencing difficulties due to the pandemic are eligible to suspend contributions to retirement and survivorship funds.

The Vietnam General Confederation of Labor (VGCL) will allow the delay of trade union fees for the first six months of 2020, and depending on the situation, may extend this till December 2020. Entry and exit policies for foreigners have also been suspended, with the exception of those who are experts, business managers, highly skilled workers or on diplomatic purposes.

Without extensive knowledge of the situation businesses may not know how the government can help them. Vietnam’s policies are constantly evolving and more so recently because of Covid-19, Links International will be hosting a webinar to cover the nation’s latest insights. Understand how the recent updates will affect your business.

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