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Doing Business in Vietnam – Looking ahead to 2022
Vietnam persevered through a difficult 2021 as the fourth wave of the pandemic took a significant toll on its economy and people. Nevertheless, despite pandemic measures, lockdowns, and travel restrictions, Vietnam welcomed more than US$19.74 billion of foreign investment in the period ending on December 20, 2021, while adding the RCEP, the CPTPP, and more to its FTA list.
With a solid vision for the future, Vietnam has created a concrete foundation to bounce back stronger in 2022. The government targets GDP growth of 6-6.5 percent, while the World Bank has forecast Vietnam’s GDP to rebound to 5.5 percent provided the pandemic is brought under control both at home and abroad. Among other measures, the government has amended a variety of important laws, which will help improve its business climate.
Recently, Filippo Bortoletti, Vietnam Country Director at Dezan Shira & Associates provided an overview of the key development in the Vietnamese FDI environment as well as emerging opportunities for businesses in Vietnam in 2022 in a webinar. We have shared a few highlights below, however, the full webinar can be viewed here.
Can you describe Vietnam’s business environment recently?
Since the end of the social distancing period at the end of September 2021, Vietnam has been slowly reopening its economy. In line with this, the government launched a pilot project tiered into three steps to completely open the country to international tourism by the second half of 2022, when it is expected that Vietnam will reopen its borders completely after almost two years of restrictions.
This will surely generate significant opportunities in the fields that were heavily impacted by the COVID-19 pandemic, such as tourism, accommodation, and transportation. Meanwhile, Vietnam has trimmed restrictions imposed on the entry of business travelers: now, any business traveler possessing a valid work visa or residency is allowed to enter the country without obtaining several approvals at the local ministries’ departments, saving in terms of costs and – especially – time.
Such improvements were possible thanks to Vietnam’s extremely effective vaccination campaign, which started slowly compared to western countries but ramped quickly with over 70 percent of the population fully vaccinated. Therefore, the outlook for 2022 is very positive.
In the last three years, the economy has remained steady. The top five sectors receiving investment were dominated by manufacturing and processing, followed by electricity production and real estate. In general, the economy grew by 2.58 percent, which was lower than what was forecast but expected due to the effects of the fourth wave of the pandemic and stringent lockdowns. Economic growth, however, was driven by exports which contributed 19 percent to the economy.
Vietnam’s main advantage is the integration of the country in international commerce. Vietnam covers most economic areas and therefore businesses can exploit Vietnam’s integration with other countries through various free trade agreements.
There are several other reasons for investing in Vietnam which include a stable social and political environment, economic growth, competitive costs, an abundant workforce, great tax incentives (including manufacturing and hi-tech), and a strategic geographic location among several others.
What are the steps for establishing a business in Vietnam?
As an investor, you need to understand why you want to invest and how to invest as well as what are the requirements for establishing your business. This involves a feasibility study. You then need to choose a location based on the requirements of your business. Once this is done, you will need to set up and choose the most appropriate corporate structure. And finally, you would need to know the key compliance procedures, which means knowing the types of taxes to be filed as well as following statutory deadlines. It pays to be compliant as to not risk penalties in the future by the authorities.
How should an investor choose the right location?
We have developed a winning strategy tiered into six steps to assist foreign investors in choosing the ideal location for their business. Upon understanding the key variables to consider – which are important and can vary based on industry, business model, as well as budget – we conduct an initial screening of available locations meeting predetermined criteria, followed by preliminary due diligence.
This article was first published by VietnamBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected].
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