Vietnam continues to develop its economy and is well placed to maintain its current levels of growth. It is increasingly attractive to investors and is drawing investment away from China and Indonesia as a jurisdiction that can offer lower cost labour, as well as an expanding middle class with a growing disposable income.
But it isn’t just a country with cheap labour, where foreign firms will look to relocate manufacturing and production of goods, it is also supported by a government that is fully aware of its current and medium term competitive advantage across various sectors, especially when compared to its immediate Indochina neighbours.
FDI flows continue to grow and the Vietnam government is keen to remain open to both MNC’s and entrepreneurs looking to gain a foothold in the market. Yes, there remain structural imperfections. As with Indonesia and China, ownership of business entities within specific sectors still only allows minority positions for foreign ownership. These protectionist measures are slowly being eroded and relaxed, allowing foreign firms the ability to move away from JV’s and co-ownership into wholly owned foreign enterprises.
The feeling talking to professionals in Vietnam is that the government has been through a number of cycles of economic development that has now created the foundations for sustainable growth in years to come. The current economy has the potential of developing further and is well on the way to becoming even more open, dynamic and flexible to adapt to changes in the regional and global economies of the future.
It is clearly apparent in Vietnam, as with Indonesia, China, Hong Kong and Japan, to name a few, that foreign firms continue to look for outsourced suppliers of services to help them enter the Vietnam market. Market research, risk profiling, incorporation, licence applications, HR, payroll accounting and tax are all key areas that present a minefield of potential concern for market entrants. Language, process and local regulation can be confusing, but there are a handful of high-quality independent consultancies providing market entry services to foreign firms.
These corporate service firms and consultancies assisting MNCs to set up in Vietnam have been experiencing 20-25% uplift in the level of enquiries and new business over the last 12 months. Some of this may not come as a surprise given the Trans-Pacific Partnership (TPP) agreement Vietnam signed last year. The compounding effect that will come from the lowering of tariffs and increased access to some of the largest global markets (Japan and US) generated by TPP, along with Vietnam’s pre-existing competitive advantage of lower labour costs, should not be underestimated. With 40% of Vietnam’s exports currently with TTP member countries, many are now predicting that the current 6-7% growth in Vietnam’s GDP could go double digit in 2017.
Corporate service providers in Vietnam, therefore, have an important role to play in guiding foreign firms with their set up, as well as providing a valuable and ongoing outsourced service to foreign firms to ensure compliance is maintained. The government is aware that this market entry assistance is a valuable tool in ensuring qualitative and quantitate growth in FDI, and has invested heavily (since its admission in 2007 to the WTO) in systems and processes to streamline licence applications and incorporations of rep offices Limited companies and joint stock companies in Vietnam.
The opportunity for these corporate service providers is obvious in a market that seemingly looks as if it will only move in one direction.