Investment in Vietnam 101: Discovering Vietnam’s Top 7 Unbeatable Advantages

In recent years, Vietnam has emerged as a compelling destination for investors seeking lucrative opportunities in a rapidly growing economy. Boasting a resilient market, a strategic location, and a dynamic workforce, the country presents a myriad of advantages for those looking to diversify their portfolios.

In this blog post, we delve into the key factors that make investment in Vietnam a wise choice, exploring the economic landscape, growth sectors, and the unique elements that set it apart in the global investment arena.

Top 7 Reasons Making Investment in Vietnam a Wise Choice

1. Free Trade Agreements

The first reason why investment in Vietnam may be the best choice for your business is their free trade agreements.

Vietnam’s entry into the World Trade Organization (WTO) in 2007 marked a significant milestone, positioning the nation as a dedicated and formidable global trade ally. Since then, Vietnam has actively engaged in the establishment of various Free Trade Agreements (FTAs) and Double Tax Avoidance (DTA) Agreements. These agreements serve the dual purpose of defining the terms of trade for imports and exports and mitigating the issue of double taxation.

As a member of the ASEAN (Association of Southeast Asian Nations) bloc, Vietnam is a party to several pivotal multi-regional FTAs, including the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the EU-Vietnam Free Trade Agreement (EVFTA). Vietnam has inked over a dozen bilateral and multilateral FTAs, providing tangible trade benefits with nations and regions such as Australia, Brunei, Canada, China, the European Union countries, South Korea, and more.

Furthermore, Vietnam is actively in negotiations for potential future agreements, including the Vietnam-Israel Free Trade Agreement and discussions with the European Free Trade Association, consisting of Switzerland, Norway, Iceland, and Liechtenstein (Vietnam-EFTA). This underscores Vietnam’s commitment to expanding its global economic partnerships for mutual benefit.

2. Promising Workforce

Vietnam boasts one of the most expansive labor markets in the ASEAN region, comprising approximately 60 million individuals and sporting an impressive 76 percent labor participation rate. The workforce in Vietnam is burgeoning at a rate exceeding 1 million annually.

Within this demographic, 35 percent of the labor force belongs to Generation Y, born between 1976 and 1995. Although Vietnam is actively working towards cultivating a highly skilled workforce, its current strength lies in a youthful and dynamic labor pool poised to bridge the existing talent gap.

Notably, nearly 95 percent of the labor force is literate, with over 88 percent having undergone secondary education. Proficiency in English is demonstrated by 5 percent of the workforce, while more than 10 percent are considered highly skilled. The distribution of employment across sectors reveals that 42 percent are engaged in agriculture, 35 percent in services, and 23 percent in industry.

A compelling factor for investment in Vietnam is Vietnam’s competitive edge in minimum wages, ranging from US$140 to US$202, making it an attractive destination in comparison to other regional counterparts.

3. Various Industrial & Economic Zone’s Policies

Vietnam’s Economic Zones (IZs) and Industrial Parks (IPs) represent meticulously planned regions designated by the government to provide strategic advantages for manufacturing and investment in Vietnam. These zones play a pivotal role in fostering growth and attracting foreign investments.

Industrial Parks serve as hubs for manufacturing activities, boasting competitive facilities, robust infrastructure, efficient logistics, and attractive tax incentives. This environment presents foreign investors with significant opportunities to enhance production efficiency and maximize profits. Strategically positioned in the North, Central, and South regions of Vietnam along key trade routes, these IPs seamlessly integrate into supply chains catering to China, Europe, and Pacific trading partners.

In contrast, Economic Zones are typically situated around major cities and economic hubs. In the North, IZs are clustered around Hanoi, while in the Central region, they are strategically positioned in and around Da Nang. In the South, IZs are concentrated in and around Ho Chi Minh City.

However, due to the escalating costs of land and increasing occupancies, there is a discernible trend of IZs expanding further away from economic centers over time, making Hai Phong, Quang Ninh, Hung Yen, Binh Duong, etc. newly rising economic zones. This evolution reflects the dynamic nature of Vietnam’s industrial landscape in particular and investment in Vietnam in general.

4. Stable Political System

Vietnam maintains a government known for its stability, offering strategic guidance and determining key policy matters. The administration actively endeavors to enhance business policies, labor laws, and its standing as a prominent destination for foreign direct investment in Vietnam within the ASEAN region. Emphasizing the importance of infrastructure development, the government remains open to exploring growth opportunities beyond the ASEAN borders.

Additionally, strategic investment in Vietnam have been channeled into industrial zones, with expectations of further augmentation as foreign direct investments persistently flow into the country. This commitment to a multifaceted approach underscores Vietnam’s dedication to fostering economic growth, both domestically and in collaboration with global partners.

>>> Learn more about the tax landscape in Vietnam through this article: Will the New Global Minimum Tax a Threat to Vietnam’s Economic Growth?

5. Fast Growing Consumer Demand

Vietnam has emerged as a lucrative investment destination, notably due to its fast-growing consumer demand. The nation’s evolving economy is witnessing a surge in consumer spending, propelling various industries forward. Vietnamese consumers are displaying changing preferences, evident in their demand for higher standards across sectors such as education, healthcare, and leisure.

A compelling example is the spike in enrollment in higher education, soaring from 16 percent in 2005 to an impressive 29 percent in 2015. This robust consumer demand not only reflects changing lifestyles but also presents significant opportunities for investment in Vietnam.

As businesses adapt to meet the evolving needs of the Vietnamese populace, investors stand to benefit from a dynamic market driven by an increasingly discerning and affluent consumer base. In essence, the fast-growing consumer demand in Vietnam positions it as a promising frontier for strategic investments.

6. Strategic Location

Vietnam’s strategic location stands as a compelling reason for savvy investors to consider this Southeast Asian gem. Situated at the crossroads of major international trade routes, Vietnam serves as a gateway to burgeoning markets in the Asia-Pacific region. Its proximity to big economies like China, Japan, Singapore, etc., coupled with strategic access to vital sea routes, positions Vietnam as a pivotal player in global trade.

Investors benefit from Vietnam’s strategic location as it fosters seamless connectivity and logistical advantages. The country’s strategic positioning enhances supply chain efficiency, reducing transportation costs and time. This not only facilitates easier access to the vast consumer base within Vietnam but also opens doors to dynamic markets in neighboring countries.

Furthermore, Vietnam’s strategic significance is amplified by its active participation in regional trade agreements, enhancing its accessibility and appeal to investors seeking a strategic foothold in the heart of Asia’s economic dynamism.

7. Dynamic Market & Open-minded Consumer Base

Vietnam presents a compelling investment destination owing to its dynamic market and open-minded consumer base. The nation’s economic landscape is characterized by rapid growth and adaptability, providing investors with a dynamic environment conducive to success. The Vietnamese market has demonstrated resilience and responsiveness to emerging trends, making it an attractive hub for business ventures.

Moreover, the consumer mindset in Vietnam is marked by open-mindedness, fostering a receptivity to new products and services. This openness creates a conducive atmosphere for innovation and market penetration, offering investors the opportunity to introduce and establish diverse offerings.

As the Vietnamese economy continues to evolve, the interplay between a dynamic market and open-minded consumers positions the country as a strategic choice for those seeking lucrative and adaptable investment opportunities.

Foreign Investor Guidance: Do and Don’t for Successful Investment in Vietnam

Do for a Great Investment

• Thorough Market Research: Understand the local market, consumer behavior, and regulatory landscape.
• Build Local Partnerships: Collaborate with local businesses to navigate cultural nuances and regulatory intricacies.
• Adaptability: Be flexible and adaptable to changing market conditions and regulatory environments.
• Leverage Government Initiatives: Take advantage of government incentives and support (foreign direct investment in Vietnam) for foreign investors.
• Tech Integration: Embrace technology to streamline operations and enhance efficiency.  

Don’t for a Successful Investment in Vietnam

• Overlook Cultural Differences: Respect and understand the local culture to foster positive relationships.
• Underestimate Regulatory Compliance: Stay compliant with local laws and regulations to avoid legal complications.
• Hasty Decision-Making: Take the time to make informed decisions, avoiding rushed or impulsive choices.
• Ignore Due Diligence: Conduct thorough due diligence on potential partners, suppliers, and opportunities for investment in Vietnam.
• Neglect Local Talent: Invest in local talent and skill development for sustainable long-term success.

Investment in Vietnam can be lucrative with the right approach. Following these do’s and don’ts will help foreign investors navigate the Vietnamese market successfully.

Investment in Vietnam stands as a compelling choice, driven by robust economic growth, a burgeoning consumer market, and evolving consumer preferences. The country’s strategic location, government initiatives, and progressive business environment further amplify its attractiveness to investors.

With a track record of resilience and adaptability, Vietnam emerges as a promising investment destination, offering ample opportunities for those seeking to capitalize on a dynamic and expanding economy.

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Data retrieved from: Vietnam Briefing