Home  »  About Vietnam   -   Why Invest in Vietnam

Why Invest in Vietnam

Strategic location

Vietnam's proximity to Southeast Asia's other major and developing markets is one of the key components to attract foreign investors. Vietnam is located at the centre of Southeast Asia; this location provides it a lot of trade benefits. Due to its close proximity to China and most other Association of South East Asian Nations (ASEAN) countries, it is a potentially big trading partner for these countries. Vietnam’s trade with China, Japan, and ASEAN countries amounted to 21.1% of its total trade in 2012.

Growing economy

Vietnam has been one of the most impressive growth stories in the global economy over the last few decades. In Southeast Asia, Vietnam has been only second to China in terms of economic growth during the first decade of the 21st century. Vietnam's GDP has grown about 10 times from that in 1991. The GDP has grown from approximately US$14 billion in 1991 to approximately US$138 billion in 2012. Historically, from 2000 until 2012, Vietnam’s GDP growth rate averaged 6.9%, reaching an all-time high of 8.5% in 2007 and a low of 5.32% in 2009. Given thepast trends of economic development and the current trends of recovery from the global financial crisis, Vietnam’s future long-term economic prospects are for investment and development.

Favourable investment climate

Over the past 3 decades, Vietnam has emerged as one of the most attractive destinations for foreign investors. Foreign investors have been regarding Vietnam as a key strategic investment location to achieve cost-effectiveness in their global supply chains. Some of the investment incentives for Vietnam include tax incentives for investments in “Preferential Investment Sectors”, liberalised economic structure, transparent investment environment, investor friendly legal and regulatory environment with well-established legal and regulatory frameworks including the Labour Code, Land Law, Civil Code, Law on Securities, Law on Competition, Enterprise Law and Investment Law, low cost labour, favourable Foreign Direct Investment (FDI) policy, clearly defined and user friendly Banking and Foreign Exchange Norms and clearly defined Licensing process for foreign investors investing in Vietnam for the first time.

The inclusion of Vietnam as a member of the World Trade Organization (WTO) shall also act as a catalyst to bring about opportunities for the economic development of Vietnam and also increased investment in Vietnam.

Increasing exports

Vietnam has been one of the most open economies in international trade as highlighted by its high import and export volumes. Vietnam has applied sequenced trade liberalisation, a two-track approach opening some sectors of the economy to international markets while protecting others. As of 2011, Vietnam's total international trade, including both exports and imports, was valued at approximately US$200 billion.

The major export from Vietnam is crude oil. Vietnam is now also a major source of the world's manufactured goods, especially garments, textiles and footwear. Vietnam is also a major exporter of agricultural commodities such as rice, coffee, tea and rubber. Export of services such in tourism, mining and high-technology sectors has been growing at a reasonable pace. The growth of tourism has been exceptional with an increase of 33% in the number of tourists in Vietnam from 2005 to 2012. This has caused an increase of 15% and 7.5% annually in the service exports of transportation and travel respectively related to tourism.

Favourable import duty regime

Vietnam has adopted a favourable import duty regime with import duty exemptions available for import of certain goods under certain categories. The goods entering Vietnam are subject to import duty at rates under three categories including ordinary, preferential and extra-preferential based on the trading relationship between Vietnam and the exporting country. Raw materials and components imported for the manufacture of goods for export are exempted from import duty provided these goods are exported within 275 days. Additionally, investments in encouraged investment projects, such as infrastructure development projects, are entitled to import duty exemptions for a period of 5 years from the start of operation for importing raw materials, supplies and accessories which cannot yet be domestically produced.

Demographic advantages

One of the major advantages of Vietnam as an investment destination is its young, hard-working, highly literate and easy-to-train labour force. Of the total population of Vietnam, approximately 60% is below the age of 25 years. The literacy rate for the population aged 15 years and above (i.e. the working group) is approximately 94%. This is the result of the importance and priority given by the Government of Vietnam to the development of quality training and education system in Vietnam. On an average, over the past decade, approximately 1.5 million people have been added to the labour force every year in Vietnam. Professionals forming a part of the labour force speak, read and write English as well as other relevant foreign languages at workplaces. Subject to appropriate training conducted by professional experts for employees, the low-cost labour force of Vietnam is its biggest advantage.

Double tax avoidance agreements (DTAs)

Vietnam has already entered into DTAs with more than 50 countries and others are at various stages of implementation and negotiation. The following are the countries with which Vietnam has signed DTAs.

Countries with which Vietnam has signed DTA agreements
Australia Hungary China Switzerland Taipei
France Poland Romani Mongolia Algeria
Thailand Netherlands Malaysia Bulgaria Myanmar
Sweden Denmark Laos Italy Finland
South Korea Norway Belgium Belarus Philippines
UK Japan Luxembourg Czech Republic Saudi Arabia
Singapore Germany Uzbekistan Canada Iceland
India Russia Ukraine Indonesia Korea Republic
Oman Kuwait Venezuela Seychelles Cuba
Austria Israel Hong Kong Sri Lanka  
Slovak Qatar UAE Brunei  
Ireland Spanish Pakistan Bangladesh  

For a country that has a DTA with Vietnam, a foreign tax credit is available to resident tax payers in respect of foreign taxes paid. The amount of credit given is the lower of the tax suffered in the foreign country or Vietnamese Corporate Income Tax attributable to foreign income.

Tax incentives

The generally applicable Corporate Income Tax (CIT) in Vietnam is 25%. However, preferential tax treatment including tax exemption, tax reduction and preferential tax rates (10% and 20%) is available for investments in encouragedsectors including health, education, high-tech, infrastructure development and software and encouraged special economic zones or areas with difficult socio-economic conditions. As a part of the preferential tax treatment, investments in encouraged sectors projects attract a corporate income tax exemption for first 4 years of operations,income tax at 50% of the preferential rate of income tax rate for the 9 subsequent years, income tax at preferential tax rate for the subsequent two years and the corporate income tax at the usual rate of 25% thereafter. Also, as a part of the preferential corporate income tax regime, losses are allowed to be carried forward for a period of 5 years.

Political stability

Vietnam's political and social stability make it one of the safest investment destinations in Southeast Asia. Vietnam is a single-party socialist state with a high degree of ethnic, linguistic, and religious homogeneity. Only political organizations affiliated with or endorsed by the Communist Party are permitted to contest elections in Vietnam. This largely helps the government to maintain political stability, promoting Vietnam as an investment avenue and ensuring economic development.