Expanding gross
domestic product (GDP), modern infrastructure and a dramatic increase in
foreign direct investment (FDI) are signs that Vietnam has transformed into an
attractive investment destination, but there are still barriers to doingbusiness which are best
navigated with local help on board.
Since 1988, there have
been 13,544 foreign investment projects with a total registered capital of
US$213 billion in Vietnam, building a large overseas investment sector which
occupies about 17% of GDP and 43.4% of industrial product value. Overseas firms
are attracted by Vietnam’s 87 million-strong population which supports a large
and young workforce and that has also seen an increase in disposable income in
recent years.
Strong economic growth
rates have been a common feature of the Vietnamese economy since the 1990s, and
even though the high levels slumped slightly during the global financial
crisis, the country has rapidly returned to pre-crisis growth trends and is
expected to continue on this path. Infrastructure, tourism development, and
related real estate and retail sector development in urban areas are all
attracting large amounts of FDI, and overseas firms are increasingly attracted
by the country’s move from a centralised to a market-orientated economy.
However, The World
Bank and International Finance Corporation (IFC) rank Vietnam in 99th place in
the world for ease of doing business, which means it is essential to seek local
help when expanding in the country.
Starting a Business
There are 10 procedures
to undertake when starting a businessin Vietnam, making
it among the most complex start-up environments in the world. What’s more, many
tasks facing new corporate entities may be unfamiliar to overseas companies,
making the task far more rigorous. Registration of the seal-sample at the
Police Department, for example, or publically announcing the formation in a
local newspaper are procedures most companies generally don’t have to complete.
Dealing with Construction
Permits
It takes 110 days and
11 procedures to get permits for construction in Vietnam, once
again requiring interaction with several official departments. Inspections must
be carried out by the Department of Construction and the municipality, and
certificates should be obtained from the Firefighters Prevention Department,
the Department of Construction and the Department of Natural Resources and
Environment.
Getting Electricity
Getting electrical
connection is among the most rigorous tasks facing startups in Vietnam, taking
115 days to complete and costing a significant percentage of income per capita.
Inspections by the local power corporation are required before completing
processes with the Traffic and Transport Department and the Firefighters
Prevention Department.
Registering Property
Registering property
takes 57 days to complete, which is far higher than the OECD norm but around
average for East Asia and Pacific. Contracts between the transferor and the
transferee are signed before taxation is paid and registration for the right to
use land is complete.
Getting Credit
Vietnam is home to
quite a stable credit environment, and obtaining capital is a relatively smooth process forbusinesses. However, the lack of a
private credit bureau can make the process a little trickier for overseas
firms.
Protecting Investors
Investor protection is
an area in which Vietnam fails
miserably. It is ranked in 169th place by the World Bank and IFC, with a weak
director liability index and shareholder suits index.
Paying Taxes
There are a massive 32
corporate tax payments to be made each year which takes an average of 872
company hours to complete. Compared to the OECD norm of 176 and the East Asia
and Pacific average of 209, taxation is one of the most burdensome processes
of doing business in Vietnam.
Trading Across Borders
Given its strong
manufacturing base and reliance on interconnectivity, trading across borders is a cheap endeavour.
However, that isn’t to say the process is not complicated, and the stream of
documentation required for both importing and exporting highlights that
cross-border trade can be difficult at the best of times.
Enforcing Contracts and
Resolving Insolvency
Enforcing contracts
takes 400 days to complete and 34 procedures. Resolving insolvency is a far
more laborious process, taking five years on average to complete and with a low
recovery rate.
Culture
The Vietnamese believe
in the teachings of the early Chinese philosopher Confucius which emphasise the
importance of relationships, responsibility and obligation. Vietnam is also a
collectivist country and community concerns will almost always come before
business or individual needs.
ANT Consult
We have the local
knowledge to help you navigate these minefields. Whether you want to set up in
Vietnam or just want to streamline your Vietnamese operations,talktous.
Further
information
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