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Vietnam – a Prominent Financial Hub for Foreign Investment

Despite a slight decline in the ease of doing business ranking, 69th from 68th in the previous year, Vietnam stays steady as one of the prominent destinations for foreign direct investment.
By Ranty Pham | EnvZone Former Staff
on April 13, 2019 | 5 min read
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The World Bank 2018 has proclaimed that ranking Vietnam is 69th among 190 economies, compared to the previous year which was 68th. Vietnam's business environment is probably drearier than its neighboring areas - particularly Singapore, Thailand, and Malaysia - nevertheless, there are several profound reasons that Vietnam has strongly allured foreign investment in these years.

Indeed, starting a business in Vietnam has faced with abundant obstacles such as the procedures for paying taxes, social insurance and even the political issues, Vietnam affirms it is an ideal financial hub with its rapid growth in the economy since 2011. Besides, the government is also making efforts to streamline the administrative system and diminish regulatory burdens to encourage the ventures to invest in Vietnam. Hence, Vietnam will continue to be a paramount priority for investors in the upcoming years.

The Rapid Growth in Economies Regardless of the Decline in Ease of Doing Business

Tariff Rate
Image credit: Vietnam Banking System

One of the reasons Vietnam has attracted foreign investor is its significant growth in GDP during the first three quarters of 2018. The GDP in 2018 was higher than in 2017. According to Vietnam Briefing, the GDP growth during Q1 – Q3 of 2018 reached 6.98%, which resulted in the most top three-quarter increase since 2011.

Moreover, Vietnam is well-known as a country with cheaper labor cost in comparison to its ASEAN neighbors especially Singapore or Malaysia. Aside from the emerging growth in economies, Vietnam's low rakings for transparency, liability may influence the investor's decision before taking steps to grant funds to Vietnam. Luckily, these dimensions only do not display the country's economic conditions.

Investor Desires to Take Challenges to Promote Themselves

Invest in Vietnam
Image credit: Vietnam Banking System

As I mentioned before, the Vietnam business's environment could be more tedious than its neighborhood, yet why lots of firms have decided to join this market? It might be boring, but it does not mean you cannot make any revenues from here. Any firms, if they learn how to survive in bad condition, they must become more powerful compared to others.

Vietnam's entry may be harder than other countries; the administrative procedures may be more complicated and take so much time, anyhow Vietnam's market is ideal land for the investor since it has several startups projects with valuable opportunities to grant funds from these plans.

What is more, the labor expense in Vietnam is lower in comparison with developed countries particularly Japan, America or European countries. Thus, firms can reduce the production's cost remarkably, and earn more interest. Thence, I firmly believe that Vietnam is a potential financial hub for the investor since various firms have implemented their foreign direct investment to Vietnam due to its proper location for trading in Asia and even the ease of doing business in this country so far.

The Government Creates Opportunities to Encourage Foreign Investment

FDI Inflow Vietnam
Image credit: Vietnam Banking System

Even though Vietnam is currently lower one spot in the ease of doing business, the government has indicated they are willing to perform effective changes.

For instance, the government positively encourage foreign investment by reducing registration fees, some tasks can operate online. The system for paying taxes in Vietnam which may take much time to proceed, nowadays, a few developments were executed, especially, companies are no longer demanding to submit the hard copies of the tax return, joint payments or value-added tax.

Notably, the ease of doing business is quite high in Ho Chi Minh city as the most active, developed, and the central industry of the country. Foreign investors should consequently remark this city. Even the north, central and southern parts of Vietnam also possess their specific advantages.

Thus, for newly entering these ideal financial hubs, the investor should conduct several types of research and seek for the right outsourcing company or third party to help reduce the time since they know how to deal in a specific zone and the country's legal system. It may be profitable yet doing business in Vietnam can be challenging.

Good news for foreign investors that the government has listed an amount of divestment of State-owned enterprises (SOEs) in 2018. It must be the propitious chance for international firms who are looking to acquire brands that holding good reputation locally and owning the power market share. The Vietnam Briefing has stated top FDI sources toward Vietnam were Japan, South Korea, Singapore, Thailand, and Hong Kong that the first two estimating account for half of the entire recorded capital. Markedly, the country capital Hanoi has received the highest FDI among the country, approximately US$4.9 billion, then Ho Chi Minh city and some southern parts such as Dong Nai, Ba Ria-Vung Tau.

Conclusion

Despite several challenges for foreign investment, Vietnam is a financial hub for any firms desire to earn more profit due mainly to its advantages of labor, ease of doing business, remarkably its resources. In the upcoming, Vietnam is predicted to welcome more and more foreign investor because of its trade expansion and emerging economies.

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