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Why now is the right time to invest in Vietnam.

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Why now is the right time to invest in vietnam

Over the last decade, Vietnam has experienced significant development, due to economic and political reforms that drove the country’s growth to new heights, transforming it into a medium-income country with exceptional prospects. In 2019 Vietnam is projected to achieve 7% growth, and has become one of the most sought out investment locations in Asia and throughout the world.

According to World Bank analysts, Vietnam’s growth is explained by three main factors: trade liberalisation, domestic reforms combined with lowering the cost of doing business, and investments in education and human capital development.

Recent changes and economic reforms, combined with political stability and the government’s drive to engage Vietnam in multiple favourable agreements and treaties, have created an extraordinary opportunity for international investors to take advantage of the regional growth prospective and focus their attention on Vietnam.

The government’s support for Foreign Investments is a critical driver for the development of the business environment. Since 1986 when the country created its first Law on Foreign Investment, enabling foreign companies to enter Vietnam, the law has been continuously revised to better support foreign investors, reduce bureaucracy and better facilitate investment into Vietnam.

Currently, the introduction of e-invoices is one of the major steps towards creating more efficient compliant system, where companies are able to issue electronic invoices and take advantage of the digitalisation of the country’s economy.

Vietnam continues to refine and amend it economic and administrative procedures and structures to meet ongoing global commitments for integration, and to progress the advancement of the domestic economy.

In September 2019, the government released a draft with proposed changes to the current law of investment and law on enterprises, adding a new legal norm in addition to the current “conditional business investment sectors”. This norm allows for more clarity by detailing the criteria that State authorities are to use when deciding whether to allow investment. The Draft further removes a category of business lines that are prohibited from investment, removes investment conditions for some business lines, and also adds a number of business lines into the category of conditional investment business lines.

Other notable changes which express the government’s continuous support for foreign investors are the proposed amendments to Article 31 on eliminating a number of investment projects that must be submitted to the Prime Minister for approval, including projects with investment capital of VND 5,000 billion and above, and for projects for which investment and business conditions are specified in international treaties and relevant laws. This last category includes projects from foreign investors in the field of shipping, business and telecommunication service enterprises with network and press infrastructure, the establishment of science and technology organisations, and 100% foreign-owned science and technology enterprises.

More details about new changes regarding Law of Investment here.

Vietnam has continued its commitment to internationalise its economy by being part of multiple Trade Agreements which offer investors commercial incentives and tariff reductions. The country has signed a historical treaty with European Union on the 30th of June 2019, boosting trade and investment on both sides, and helping Vietnam to further integrate into the global economy and the international community. The EVFTA will eliminate almost all tariffs between the EU and Vietnam. It will disband tariffs on 65 percent of the value of EU exports the moment the FTA enters into force, with the remaining tariffs being phased out over the next decade. Meanwhile, 71 percent of EU imports from Vietnam will be tariff-free once the EVFTA enters into force, rising to more than 99 percent over the following 7 years.

In the EVFTA, Vietnam has increased its offered benefits compared with the World Trade Organisation (WTO) in terms of market access granted to EU service providers, where additional sectors will be opened up for EU investors. The EU has described the free trade deal as “the most ambitious free trade deal ever concluded with a developing country.”

In 1995, Vietnam joined the ASEAN free trade area and in 2000 it signed a free trade agreement with the US. Vietnam has then joined the World Trade Organisation (WTO) in 2007 and is currently participating in multiple free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is also a member of the United Nations, the ASEAN Regional Forum and the Asia-Pacific Economic Cooperation Forum, among other international organisations. More details about the Vietnam trade agreements here.

A recent Standard Chartered briefing headed by their chief analyst from Singapore revealed a projected slowdown of the global economy in 2020 and 2021. Global growth is at its slowest point since the financial crises of 2008-2009, which will further impact US, China and the EU region, currently already in a difficult situation with only 1.2% growth.

As Asia contributes to 2/3 of the global growth, investors will focus extensively in the region. Cumulated with the US-China trade war, businesses will shift their attention towards low risk markets with high return potential, and the country which stands out the most is Vietnam.

Amid the projected slowdown in the next two years forecasted by banks and analysts, Vietnam remains one of the best markets to invest in, offering long term stability and security, without issues such as trapped capital and devaluation of currency.

Updated on February 28, 2024

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