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 business in 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 for businesses. 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 Lawyers
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,talkto us.
Further
information
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