Top 10 reasons to invest in Vietnam
Located at the heart of Southeast Asia, Vietnam’s ever-evolving urbanization, continual innovation, stable growth rate, greater economic integration and socio-economic ambitions make it one of the most lucrative investment destinations in the world. In fact, in recent years, dozens of transnational corporations and world-renowned investors flock to Vietnam to capture the various thrilling business opportunities the country has to offer. Here are 10 reasons why investing in Vietnam is a smart move for foreign investors to tap into the growing and flourishing Asian markets.
Ideal proximity to other major markets
Vietnam, the easternmost country on the Indochina Peninsula, is situated in the Southeast Asian region with an area of approximately 330,000 kilometer square, serving as a gateway to the Pacific Ocean and Indian Ocean. To the North, Vietnam borders with China, the biggest market in the world with a population of more than 1 billion people. To the West, it is adjacent to Laos and Cambodia, the also two emerging economies in Southeast Asia. This strategic location enhances the country’s connectivity because all major international economic and commercial centers such as Singapore, Kuala Lumpur, Bangkok, Manila, Hong Kong, Taiwan, Tokyo, Seoul, and New Delhi are all within a few-hour flight. In addition, lying parallel to the established sea trade routes of Asia with a long coastal line of more than 3,000 km and world-class deep-water ports, Vietnam is a busy transit hub for cargos and passengers across Asia, from Singapore and other southern countries to China, or to East Asian, African and European countries.
Substantial market size and market growth potential
With a population of about 90 million, ranking 13th in the world and 3rd among ASEAN countries, Vietnam has enormous market potential to make any business investment a profitable one. As the country’s economic conditions have been continually improved, Vietnam’s GDP per capita tripled from more than $600 per person per year in 2005 to almost $2,000 in 2014, empowering its consumers with significantly more purchasing power. For the time being, the majority of the population is in the lower-middle income bracket, but the upper-middle income proportion is predicted to grow from less than 1% in 2011 to almost 10% in 2030. Also, a “super-rich” elite has appeared in Vietnam and according to the statistics of World Bank, in 2013, Vietnam had 110 "super-rich" people with assets of over USD 30 million, up three times compared to 10 years ago.
Moreover, there are considerable changes in spending habits of Vietnamese people. Although most of them are still conservative and choosey when it comes to spending their hard-earned income, Vietnamese people are shifting from shopping to satisfying basics needs to also boasting their styles and new-found social status. Besides, demand for modern retailing services is surging, making retail trade sector an attractive investment field for domestic and foreign investors.
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Vietnam key economic and demographic indicators
- Region: Southeast Asia
- Population: 89.97 million (2013)
- Ethnicity: Kinh (85.8% of population), Hmong, Dao, Tay, Thai...
- GDP: $171.4 billion (2013)
- Labor Force: 47.75 million
- Latest Unemployment Rate: 2.2%
- Per Capita Personal Income: USD 1,960 (2013)
- Administrative units: 58 provinces and 5 cities under direct management of central government
- Currency: Vietnam Dong (VND) 1 USD = 21,320 VND (Jan, 2015)
Vietnamese government has made ceaseless efforts to open and integrate its economy into the global economy. After officially becoming a member of the World Trade Organization (WTO), Vietnam has participated in many international cooperative agreements including various free trade agreements (FTA) with many regional and global partners. Especially, Vietnam is actively negotiating the Trans-Pacific Partnership agreement (TPP) which promises to open up Vietnam’s market even further to investors.
As a result, Vietnam export turnover continued to increase with the growth rates averaging 23.12%/ year over the period of 2010-2013. Export turnover increased mainly in the foreign-invested sector for such products as electronic appliances, computers and components, telephones and accessories, textiles, footwear... Regarding markets, the European countries, the United States, ASEAN countries, Japan, South Korea and China are the largest export markets of Vietnam. Import turnover reached USD 131.3 billion in 2013, up 15.4% compared to 2012. The foreign-invested sector accounted for the biggest proportion of the total import turnover. China is the largest import market of Vietnam, followed by ASEAN countries, South Korea, Japan, the EU and the United States. Increasing import – export activities showed that Vietnam's economy had recovered from the recent global economic recession and companies felt confident to expand their operation and were willing to grasp new opportunities.
Continuously improved institutional and regulatory quality
In 1986, Vietnamese government implemented a comprehensive reform program known as “Doi Moi” which forever abandoned the hard-reform-socialism approach and radically dismantled central planning, liberalizing trade, promoting private sectors, and constructing a socialist-oriented multi-component economy. Since then, Vietnamese government has remarkably improved its legal framework and institution to create a transparent and fair investment environment for investors. In 2015, a number of amended laws such as Law on Investment, Law on Enterprises, Law on Land, and Residential Law will take effect, assuring to help foreign investors to overcome bureaucratic bottlenecks and create an equal legal system to attract high-quality investment projects. Besides, Vietnamese government also strives to restructure its economy and reform economic growth model to promote innovation and strengthen the country’s competitiveness. According to the Global Competitiveness Report 2014-2015 by World Economic Forum (WEF), Vietnam ranked 68, up 2 ranks compared with 2013-2014.
Vietnam currently has a golden age structure with more than 50% of people of working age and more than one third of its population residing in urban areas. The average labor productivity for Vietnamese workers has risen steadily from 2005 – 2014, averaging 3.7%/year over that period, narrowing the gap between the country’s labor productivity and the top performers’ in the region. The rapidly rising demand for trained labor to meet up with economic development tendencies has motivated Vietnam to renovate its labor force and increase the share of skilled labors. Vietnam now thrives on its workforce’s dexterousness, diligence, strict discipline, a can-do attitude, and strong work ethics. Vietnamese labor force offers a winning combination of the abundance of low-cost general labors and the wide availability of highly competent talented individuals who master the knowledge of Western/Asian business culture and are eager to join the global force.
World-class business infrastructure
High-quality infrastructure is the most important factor enabling efficient business operation and reducing transactional costs. Vietnam’s infrastructure has been persistently upgraded to provide the best condition to businesses to invest in the country.
+ Global and domestic connectivity
The transportation infrastructure system in Vietnam consists of roads and highways, railways, ports, harbors and airports. At present, Vietnam has 21 commercial airports and 10 of them are international airports with modern facilities and equipment, connecting Vietnam with 41 destinations around the world including ASEAN countries, China, Japan, South Korean, the United States, France, Germany, and Australia. To travel to other countries in the region such as China, Cambodia, Laos and so on, business travelers can easily choose other means of transportation such as cars, buses and trains. The national road system is completed and advanced making it possible to travel to everywhere in the country. In big cities, public transportation, taxis, and “xe om” (motorbike-taxi) are widely available and reasonably priced, catering to the needs of all local people, tourists, and business travelers.
With its deep-water seaports and a commercial history, Vietnam has also long been an international logistics and shipping hub. In 2014, the total cargo throughputs handled by Saigon Port reached 109 million tons, while that number for Hai Phong Port was over 55 million tons.
+ State-of-art communications
The system of post and telecommunication in Vietnam is of international standard, providing fast, reliable and high quality services such as ADSL, rapid data transfer, wide broadband MAN. The Internet service in Vietnam is also among the cheapest in the world.
+ Rapidly increasing industrial zones, economic zones and hi-tech parks
Vietnam has around 256 industrial parks and 20 economic zones across all the cities and provinces, and 03 hi-tech parks in Hanoi, Ho Chi Minh City and Danang City. When investing in the industrial zones and export processing zones, businesses can benefit from various incentives policy such as lower tax rates and other investment supporting services.
Rich natural resources
Vietnam has an abundance of natural resources including oil, gas, coal, and various mineral resources and it enjoys increased attention from international exploration companies, particularly in the oil and gas sector. In addition, Vietnam is also bestowed with other natural resources including significant hydropower potentials, marine resources, tropical forest, and agricultural potential. Realizing the paradoxical “resource curse”, in the past decade, Vietnamese government has tried to shift its economic activities from plain natural resource extraction to other higher value-added activities and toughen their environmental protection policy.
In term of resources for tourism and related-service development, with 4 UNESCO-designated heritages (Hue Imperial City, Phong Nha – Ke Bang Cave, Hoi An Ancient Town, My Son Sanctuary), stunning beaches, mysterious tropical forests, breathtaking mountainous landscapes, other historic places and a thousand-years-old culture, Vietnam can allure and fulfill the desire of any visitors. Staying in Vietnam offers tourists a nowhere-to-be-found travel experience which will leave them a lasting impression and enrich their life with new flavors and perspectives.
Economic and political stability
If in the past, the word “Vietnam” was associated with images of war, destruction and poverty, it is not the case anymore. In the context of recent global political unrests, religious conflicts and terrorism, Vietnam emerges as a safe haven for investment, steadily revamping its economy as well as maintaining its political stability. Within the Asian region, as the political situation in many countries such as Thailand, Indonesia, and China ... has become complicated and uncertain, causing concerns among investors, many foreign investors consider moving their capitals and resources to Vietnam to utilize its social stability, sound economic growth, and increasing favorable conditions for businesses.
According to the report "The World in 2050" by HSBC published in 2012, Vietnam ranked 7 in 10 best long-term investment destinations. UNCTAD also rated Vietnam as one of 10 developing Asian countries that attracted the most interests from investors in 2012 and 2013. According to the Survey report on the activities of American firms in the ASEAN countries published by the American Chamber of Commerce in Singapore (AmCham Singapore), Vietnam was considered the second most attractive destination after Indonesia for American businesses to extend businesses. American companies assessed that Vietnam had advantages in abundant and low-cost labor market and stable macro environment.
Living in Vietnam
Life in Vietnam presents a perfect combination of a vibrant, energetic lifestyle of a fast growing economy and the cultural and traditional heritages of a thousand-years-old culture. In big cities such as Ho Chi Minh City, Danang, Hanoi, life is often eventful and exciting with many business and entertainment activities occurring all day long and even deep into the night, and it is very easy to go out and make new friends or form business relationships with people. However, in other smaller towns, mountainous areas or other less travelled corners, life still remains relatively tranquil and undisturbed where you can enjoy the beauty of simplicity and immerse yourself in the heart of the nature. As Vietnam’s economy grows, the country’s living standards also rise, and people living in Vietnam can have access to world-standard facilities such as luxurious resorts and hotels, first-class medical centers, extravagant shopping malls, movie theaters, professional stadiums, etc.
Ever since Vietnam opened its economy and alter its institutional and legal framework to create a stable investment environment, foreign investors are excited to explore this appealing investment destination. The first wave of FDI to Vietnam took place from 1991 – 1997 with more than 2,000 registered projects and a committed capitals of USD 33 billion. Many leading transnational corporations established their presence in Vietnam during this period such as BP, Shell, Total, Daewoo, Toyota, Ford, Coca-Cola, and Sony. The recent years also witness more world-recognized reputable companies moving to Vietnam such as Intel, Metro, and Honda. In 2013-2014, Samsung strengthened its production in Vietnam by aiming to invest up to USD 3 billion in the country, and Samsung’s investment story in Vietnam immediately become phenomenal. Most companies prosper on Vietnam’s low costs of doing business, rich pool of labors, innovation, growing domestic demand and plentiful development potentials.