Vietnam’s economic transformation during the last 30 years has been nothing short of remarkable. Now, it is the third largest market in Southeast Asia and one of the fastest-growing economies in the world. Vietnam’s future is bright, no wonder many entrepreneurs choose to be the part of it. In 2018 Vietnam attracted the record foreign direct investment (FDI) of $35 billion. Today the country is home to nearly 26,000 FDI projects with total registered capital of $350 billion.
So, what exactly makes this Asian state such an attractive destination for foreign companies?In this article, we will cover 7 main reasons why it is worth starting a business in Vietnam.
1. Stable and fast-growing economy
Over the last few decades, Vietnam’s economic growth has been one of the fastest in the world. According to the World Bank, the GDP rate in Vietnam has experienced a stable growth, averaging 6.46% a year since 2000. Today it ranks 46th for nominal GDP and 31st for purchasing power parity GDP. And these numbers are expected to increase by 2023.
It is extremely valuable when a country can provide economic security and stability in the times of uncertainty.
2. Easy to do business
Vietnam has been voted 69th among 190 states by ease of doing business. When only mere 5 years ago it was 99th. The government has made numerous amendments to their regulations in order to improve Vietnam’s institutional and legal framework, creating a transparent and fair investment environment for both, locals and international entrepreneurs; and they promise to continue in the set direction.
3. Increasing integration into global community/trade agreements
Once an outcast, now Vietnam is an extremely active member of the international community. Since 1995, when Vietnam normalised diplomatic relationships with the US and joined ASEAN, it has been becoming more and more open to the global economy.
Currently Vietnam has memberships and agreements with the number of countries and organisations:
· ASEAN Economic Community (AEC), allowing free trade with Southeast Asian countries
· Bilateral Trade Agreement with the US
· Free Trade Agreement with the EU
· ASEAN – Australia and New Zealand Free Trade Agreement
· ASEAN – India Free Trade Area
· ASEAN – japan Comprehensive Partnership
· ASEAN – China Free Trade Area
· ASEAN – Korea Free Trade Area
· Vietnam – Chile Free Trade Agreement
· Vietnam – Japan Economic Partnership Agreement
· Vietnam – Republic of Korea FTA
· Vietnam – Eurasian Economic Union FTA
· Comprehensive and Progressive Agreement for Trans-Pacific Partnership
All this shows that Vietnam is eager to promote its economic growth and commitment towards trading with other countries.
4. Strategic location
Located in the centre of ASEAN, Vietnam has a strategic location, allowing you to reach all the major business hubs in Asia: Indonesia, Malaysia, Philippines, Singapore and Thailand. Moreover, Vietnam’s proximity to China, makes it an ideal location for investors seeking to diversity their supply chains from China. By doing this, entrepreneurs are able to limit delays or interruptions to existing supply chains. In addition to this, its long coastline gives direct access to the world’s main shipping routes.
5. Continuously improving logistics
Vietnam is investing heavily into its infrastructure, making sure they provide an efficient business environment for investors. In the past decade, its infrastructure spending growth was among the fastest in ASEAN and nearly double its GDP growth.
This has helped boost Vietnam’s World Bank Logistics Performance Index ranking by 25 points, bringing it to the honourable 39th position among 160 countries. Presently, Vietnam is ahead of Greece, Iceland, India, Indonesia, Malaysia, Russia, the Philippines and Turkey.
6. Large population
Many people don’t realise how large Vietnam’s population is. With over 95 million inhabitants, it is home to more people than any European country. By 2030 it is expected to grow to 105 million.
In addition to this, the median age in the country is 30.8 years. Which is much younger than in most of the countries in North America, Europe and Asia. Around 60% of the Vietnamese are under the age of 35. In the meantime, people in the working age make up 52% of the country’s residents.
Rapidly increasing economy and population mean growing middle class, which will give a boost to nation’s buying capacity. Right now, Vietnam’s middle class is around 40 million people. By 2030 it is forecasted to reach 95 million, doubling the client base for businesses.
7. Competitive labour costs and skilled workforce
In spite of continuous increase of minimum wage, labour cost in Vietnam is relatively low. For example, minimum wages in the country remain twice smaller than in China.
Furthermore, 97% of Vietnam’s workforce is literate and many of them are skilled. Luckily, the authorities invest more money in education than any other developing country. They have taken steps to meet the demand of high-skilled industries, including increasing vocational and technical training.
As you can see, Vietnam is well-worth opening a business. However, despite the many benefits, there can also be risks involved, as there would be when investing in any other country.
The most important is to do a proper research and to choose the right market entry strategy. International PEO can help you avoid most of the risks associated with international business expansion. Reach out now to find out more.