AN OVERVIEW OF VIETNAM
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| Hoan Kiem Lake - Hanoi |
Vietnam is conveniently located in
the centre of South East Asia and is
bordered by China to the north, Laos
and Cambodia to the west.
The total area of Vietnam is over
330,900 kilometres and its geography
includes mountains and plains.
Viet Nam’s population is spread
throughout the country.
Ranked as the 14th most populous
country in the world, with a
population of over 92 million people
and a median age of 30, Vietnam
represents a huge pool of both
potential customers and employees
for many investors.
Hanoi in the north is the capital of
Vietnam and Ho Chi Minh City in the
south is the largest commercial city.
Da Nang, in central Vietnam, is the
third largest city and an important
seaport.
Economic Environment
GDP growth was 6.2% in 2016, down
from 6.7% in 2015 and is forecast to
hit 6.3% in 2017.
Over the last 20 years, GDP growth
has averaged approximately 7%. As
well as enjoying strong export growth,
which grew at more than 8.6% year-on-year
in 2016, Vietnam is becoming
an increasingly large importer of
capital goods which is necessary to
meet its large infrastructure needs.
Key Sectors and Trading
Partners
Vietnam continues to diversify
away from agriculture. Among the
industrial sectors, services account for
approximately 51% of GDP followed
by manufacturing at 33%. The
agricultural sector made up 16% of
GDP in 2016.
The growth in exports has been driven
by the fast growing manufacturing,
telecommunications, clothing and
apparel sectors with major exports to
US (21%), EU (19%), China (12%),
ASEAN (10%) and Japan (8%).
In 2016, much of the foreign direct
investment into Vietnam came from
Korea (29%), Japan (11%) and
Singapore (10%).
Foreign Direct Investment
With a stable exchange rate and
reductions in inflation (which fell
from a peak of 18% in 2011 to
2.6% in 2016), the macroeconomic
environment has dramatically
improved in recent years.
Vietnam therefore remains one of
the most attractive destinations for
foreign investors in South East Asia. It
received $24 billion in foreign directinvestment in 2016, a 7% increase on
the previous year.
Vietnam has entered into or completed the negotiation of a number of Free Trade
Agreements (FTAs) including both collective FTAs as a member of ASEAN, and
bilateral FTAs (such as FTAs with the EU, Japan, Chile and Eurasian Economic
Union).
Despite the uncertain fate of the Trans Pacific Partnership (TPP), Vietnam is still
getting increasingly integrated to the global economy.
The EU - Vietnam FTA is expected to be the next major milestone for Vietnam
from a trade perspective. It should be effective for Viet Nam by 2018; and this FTA
is expected to liberalise 90% of imports from both sides in a 10 to 15 year time
Legal and Regulatory Regime
The Socialist Republic of Vietnam is
a single-party state. As the only party
in the political arena, the role and
influence of the Communist Party is
unique.
Vietnam’s legal powers are
centralised in one supreme body, and
then delegated to lower bodies located
in Vietnam‘s 63 municipalities and
provinces. The National Assembly
is the only body with the power
to amend the Constitution and
pass laws but the implementation
and administration of such laws is
decentralised.
The Vietnamese government
has developed various policies
to encourage enterprise and
foreign investment in recent years.
However, certain industries such
as financial services, logistics,
telecommunications, mining and
utilities continue to be subject to
restrictions on foreign ownership.
Viet Nam joined the World Trade
Organisation (‘WTO’) in 2007. Under
its accession commitments, Viet Nam
opened up various business sectors
to foreign investment, in some cases
under a phased approach. These
commitments are generally referred
to when assessing whether foreign
investment in a particular sector is
allowed.
There is a hierarchy of regulations
in Viet Nam, with laws being passed
by the National Assembly, and their
implementing decrees and circulars issued by the government and its
ministries, respectively. A plethora of
other legal instruments/guidelines
are also issued by various other
authorities.
Law on Investment and
Enterprises
In late 2014, the National Assembly
passed a new Law on Investment
(LOI) and a new Law on Enterprises
(LOE), both of which come into
effect on 1 July 2015. A series of
implementing regulations were
issued in late 2015 (including Decree
78/2015/ND-CP guiding enterprise
registration, Decree 96/ND-CP
guiding the implementation of the
LOE, and Decree 118/2015/ND-CP
guiding the implementation of the
LOI). These two new laws contain
major changes to the former laws
(passed in 2005), and are expected to
create more favorable conditions for
investors into the future.
Workforce and Cost of Living
The number of people of working age
in employment in Viet Nam totaled
over 54 million in 2016 with an official
unemployment rate of 2%.
Wages and salaries in Viet Nam
vary widely across occupations and
geographic locations. In 2016, the
average annual income per person
was over $2,200.
In comparison with other countries
in Asia, the cost of living in Viet Nam
remains relatively low.
Business Etiquette and
Culture
Many Vietnamese are more
comfortable using their native
language rather than English.
However, many English speakers can
be found in Viet Nam, especially in the
larger cities.
Presenting business cards is an
important ritual in the Vietnamese
business world. Cards are exchanged
at the beginning of a meeting using
both hands. Translating written
materials into Vietnamese shows
respect for Vietnamese colleagues and
business partners.
Face to face business meetings
are important in Viet Nam and an
appropriate level of respect must
be shown according to rank and
seniority.
The Future
As a member of the WTO, Viet Nam
must continue to improve its business
and investment environment and
bolster its legal system to meet
WTO requirements. Viet Nam
has made significant efforts to
ensure that foreign investors are
not disadvantaged compared with
their local counterparts, including
an overhaul of the legal framework
governing investments and protection
of intellectual property. Furthermore,
the government has taken measures
to simplify administrative procedures
in areas such as import and export,
company establishment and making
tax payments.
Despite these measures, there
remain various regulatory issues and
obstacles that must be considered
by foreign investors coming into Viet
Nam. In a recent report by the World
Bank, Viet Nam was ranked 82nd
in the world for the ease of doing
business.
However, foreign investment in VietNam continues to grow, and the
Government shows its commitment
to market-oriented reforms through
its ongoing efforts to attract foreign
direct investment.
If you want to see more about FDI opportunities in Vietnam, contact us: info@fdi-vietnam.com
Source: PWC Report
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