News Jan 08 24

Investment in Vietnam: Unveiling Opportunities and Overcoming Challenges

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Starting on the path of investment in Vietnam offers a compelling journey with a tapestry of opportunities and challenges. As the country emerges as a vibrant economic hub, the landscape beckons with promising ventures, but not without its share of intricacies. Navigating the nuances of this dynamic market demands strategic insights into the multifaceted realm of opportunities and challenges.

In this blog post, we delve into the diverse facets that define the experience of investment in Vietnam, shedding light on the prospects and hurdles that investors encounter on this transformative voyage.

Investment in Vietnam: Top 5 Great Prospects You Must Know

1. Abundant Workforce

Vietnam stands out as a key player in the ASEAN labor market, boasting a vast workforce of around 60 million individuals with an impressive 76 percent labor participation rate. The annual growth of over 1 million workers contributes to the country’s dynamic economic landscape. Generation Y, comprising 35 percent of the workforce (born 1976-1995), adds vigor to Vietnam’s labor pool.

Investment in Vietnam: Top 5 Great Prospects You Must Know
Source: Flickr

While efforts are underway to nurture a highly skilled workforce, the current strength lies in the youthfulness of the labor force. Notably, 95 percent of workers are literate, with 88 percent completing secondary education. Proficiency in English is seen in 5 percent, and over 10 percent are highly skilled. Sector-wise, 42 percent engage in agriculture, 35 percent in services, and 23 percent in industry.

Investment in Vietnam becomes compelling due to its competitive edge in minimum wages, ranging from US$140 to US$202, making it an attractive choice among regional counterparts for savvy investors eyeing a burgeoning market. Consider investing in Vietnam for sustained growth and tapping into this youthful, skilled workforce.

2. Open-minded and Dynamic Market

Vietnam emerges as a compelling investment haven, thanks to its vibrant market and open-minded consumer base. The nation’s economic landscape boasts rapid growth and adaptability, creating a dynamic environment ripe for success. Demonstrating resilience, the Vietnamese market responds adeptly to emerging trends, making it a sought-after hub for business ventures.

The factor that makes investment in Vietnam worth considering is the open-minded customer base. Compared to other countries in the area, the consumer mindset in Vietnam is characterized by open-mindedness the most, which fosters receptivity to novel products and services. This mindset provides an ideal backdrop for innovation and market penetration, allowing investors to introduce diverse offerings with ease.

Investment in Vietnam: Top 5 Great Prospects You Must Know
Source: Wikimedia

As the Vietnamese economy undergoes continuous evolution, the synergy between a dynamic market and open-minded consumers positions the country as a strategic choice for those eyeing lucrative and adaptable opportunities for investment in Vietnam.

3. Promising Policies

Due primarily to the country’s extensive network of free trade agreements (FTAs), investment in Vietnam proves to be a strategic move for businesses. Joining the World Trade Organization in 2007 marked a pivotal moment, solidifying Vietnam’s status as a committed global trade ally.

As an integral member of ASEAN, Vietnam actively participates in key multi-regional FTAs such as the Regional Comprehensive Economic Partnership (RCEP), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the EU-Vietnam Free Trade Agreement (EVFTA). These agreements not only define import-export terms but also alleviate concerns about double taxation.

Vietnam has signed over a dozen bilateral and multilateral FTAs, yielding tangible trade benefits with nations like Australia, Canada, China, and the European Union. Currently negotiating agreements like the Vietnam-Israel Free Trade Agreement and engaging with the European Free Trade Association (EFTA), Vietnam showcases its commitment to global economic expansion.

Choosing investment in Vietnam aligns businesses with a nation actively cultivating mutually beneficial global economic partnerships.

4. Stable Political System

Vietnam boasts a government synonymous with stability, steering strategic initiatives, and shaping pivotal policy decisions. Actively committed to refining business policies and labor laws, it solidifies its standing as a premier destination for investment in Vietnam within the ASEAN region. Prioritizing infrastructure development, the government showcases openness to exploring growth avenues beyond ASEAN borders.

Investment in Vietnam: Top 5 Great Prospects You Must Know
Source: Flickr

Strategic investment in Vietnam is notably funneled into industrial zones, with expectations of continued amplification as foreign direct investments persistently pour into the nation. This steadfast commitment to a multifaceted approach underscores Vietnam’s unwavering dedication to nurturing economic growth, both domestically and through collaborative endeavors with global partners. The trajectory of investment in Vietnam underscores its role as a burgeoning hub for international investors seeking stability and growth opportunities.

5. Strategic Location

Vietnam’s prime geographical positioning makes it an enticing prospect for astute investors eyeing the potential of Southeast Asia. Nestled at the nexus of crucial global trade routes, Vietnam emerges as the gateway to burgeoning markets across the Asia-Pacific region. Its close proximity to economic powerhouses such as China, Japan, and South Korea, along with strategic access to vital sea routes, positions Vietnam as a pivotal player in the panorama of global trade.

Investing in Vietnam holds significant advantages, driven by its strategic location, fostering seamless connectivity and logistical efficiency. This strategic positioning contributes to streamlined supply chains, resulting in reduced transportation costs and time. This not only facilitates convenient access to Vietnam’s extensive consumer base but also unlocks opportunities in dynamic markets across neighboring countries.

For those contemplating investment in Vietnam, its strategic location becomes a cornerstone for capitalizing on regional growth and economic vibrancy.

>>> Read more: Top 3 best provinces for placing manufacturing hub in Northern Vietnam

Challenges When Investing in Vietnam

1. Strong Local Business Culture

Effectively maneuvering through Vietnam’s industrial landscape poses distinctive challenges for businesses. The local business culture, heavily influenced by factors like the tradition of flexibility with timelines, contrasts starkly with Western norms. Individuals from Germany, Japan, or Finland, who prioritize punctuality and adherence to rules, may find this cultural shift challenging. A key facet is adapting to the communication styles, where Westerners favor directness while Northern Vietnamese embrace indirect approaches to maintain face.

Challenges When Investing in Vietnam
Source: Flickr

Comprehensive comprehension and adaptation to Vietnam’s business intricacies are imperative for seamless operations. Whether in negotiation techniques or communication preferences, these cultural subtleties significantly impact the success of ventures.

Foreign business owners eyeing investment in Vietnam must possess acute awareness of these dynamics, fostering harmonious integration into the local business environment. Acknowledging and navigating these cultural nuances is not just a strategic move but an essential prerequisite for a successful investment in Vietnam.

2. Lack of Highly-skilled Specialists in Manufacturing & Hi-tech

The persistent scarcity of skilled labor poses a prolonged hurdle for the industrial real estate sector in Vietnam. As of the second quarter of 2023, data from the General Statistics Office revealed that only 26.8 percent of the workforce possessed degrees and certificates, leaving a substantial 73.2 percent categorized as low-skilled or unskilled labor.

In the Labor Market Report 2022 by Vietnamworks, a prominent online recruitment channel, an evident mismatch between labor supply and demand was noted. Sectors like construction, services, technology information, and manufacturing grapple with shortages, particularly in bustling metropolises such as Ho Chi Minh City and Hanoi, registering resource deficits of 43.02 percent and 48.11 percent, respectively.

Challenges When Investing in Vietnam
Source: Hinrich Foundation

The unattractiveness of industrial parks is exacerbated by the absence of worker support measures, including accommodation, in-work training, and childcare assistance. This predicament presents a formidable challenge for both the Vietnamese government and foreign enterprises, emphasizing the urgent need for substantial investment in Vietnam to enhance labor qualifications and foster talent retention within these regions.

3. Complicated Legal Procedures

Navigating the labyrinth of investment policies for foreign investors in Vietnam remains intricate, despite multiple revisions. Decree No. 82/2018/ND-CP exemplifies this complexity, requiring construction permits to secure approval from the Ministry of Planning and Investment, various related ministries, and agencies. The final endorsement rests with the Prime Minister, followed by a decision from the Principal People’s Committee on industrial park establishment. This convoluted process poses challenges for foreign investors, compounded by diverse provincial laws and restrictions.

Understanding Vietnam’s laws, often expressed in intricate, academic Vietnamese, becomes arduous for foreigners. The case-by-case adaptation of the law adds further confusion for foreign workers striving to interpret and navigate the legal landscape accurately.

Given these complexities, CORE5 Vietnam recommends engaging a local team specializing in law and compliance to avert unexpected hurdles. Our experienced team at CORE5 Vietnam stands ready to efficiently guide you through these intricacies. For seamless assistance with investment in Vietnam, contact our expert team here.

Must-know Opportunities & Threats Before Investing in Vietnam: Summary

Investing in Vietnam presents a dynamic landscape brimming with both opportunities and challenges. The nation’s robust economic growth, strategic location, and burgeoning middle class underscore its potential for investors.

However, navigating regulatory complexities, diverse regional laws, and cultural barriers pose substantial challenges. To capitalize on the promising prospects while mitigating risks, a nuanced approach is crucial.

With the right strategy and local support, the journey of investment in Vietnam can yield substantial returns, marking a strategic move in the ever-evolving global investment arena.

Data retrieved from: Vietnam Briefing

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