Vietnam is a country with rich cultural heritage and a rapidly developing economy, increasingly becoming an attractive destination for foreign investors seeking new business opportunities. Against the backdrop of a complex global economy and slow recovery in domestic aggregate demand, the Vietnamese market still demonstrates solid development potential. The Asian Development Bank (ADB) forecasts Vietnam’s GDP growth to reach 5.8% in 2023, marking the highest growth rate among ASEAN nations. Therefore, Vietnam remains a bright spot for attracting FDI. In the latest Q3/2023 Business Confidence Index (BCI) published by the European Chamber of Commerce in Vietnam (EuroCham), 63% of surveyed businesses ranked Vietnam among the top 10 global FDI destinations. To keep pace with Vietnam’s market growth, foreign investors need to understand the domestic business landscape and adjust their strategies accordingly. This article provides 10 useful tips for foreign investors looking to enter Vietnam.

1. Seek Professional Market Development Consultants

The rapidly changing economic environment presents both opportunities and challenges for companies aiming to enter the Vietnamese market. Complexities in the tax system, inconsistencies in legal regulation enforcement, and difficulties in mastering trade and legal restrictions can pose significant hurdles for investors. Therefore, seeking and collaborating with top experts from professional consulting firms like Baker McKenzie, Boston Consulting Group, KPMG, EY, PwC, and Deloitte can help businesses navigate these challenges quickly and effectively. Additionally, firms like Dezan Shira and Associates, AASC, CPA, Mazars, and Kreston also provide services tailored to specific needs and budgets. For example, the VAT refund process for manufacturing enterprises is quite complex and can lead to tax debt-related issues. Local consulting experts can help foreign investors address this effectively.

2. Seek a Law Firm for Guidance on All Legal Procedures

When entering a new market, investors may face challenges in understanding a culture, legal system, and operational procedures vastly different from their “home” market. Seeking support from legal consulting partners to navigate and ensure regulatory compliance is essential for minimizing business risks. Many projects in Vietnam involve lengthy procedures, with waiting times for investment registration and land use right certificates exceeding one year, and even longer for projects requiring the Prime Minister’s approval. To expedite administrative processes, businesses should familiarize themselves with investment laws and seek suitable and trustworthy legal consultants.

3. Choose a Strategic Location for Your Production/Business Establishment

When setting up a business, investors should choose a strategic location, ideally within a two-hour drive from major hubs like Hanoi or Ho Chi Minh City, as well as seaports and international airports. Beyond distance considerations, infrastructure is also a crucial factor. Establishing a business in an area with developed infrastructure or designated as a key investment area can transform initially unfavorable locations with low rents and competitive labor costs into ideal spaces for future commercial activities. Investors can refer to the list of provinces/cities with the highest FDI attraction, such as Hanoi, Ho Chi Minh City, Hai Phong, Bac Giang, Binh Duong, Nghe An, Bac Ninh, Dong Nai, Quang Ninh, and Hung Yen to make decisions aligning with their business development direction.

4. Recruit Local Personnel for the Management Team to Build Better Relationships with Relevant Ministries and Agencies.

Understanding the local culture and business norms is crucial. Local human resources can play a key role in accelerating adaptation to the local culture and fostering quick connections with the local business community.

5. Strictly Comply with State Regulations on Construction Permits, Fire Prevention & Fighting, Wastewater Treatment, and Environmental Impact Assessment During Construction to Avoid Unexpected Costs.

6. Add a 10% Contingency Buffer to the Construction Budget to Avoid Cost Overruns.

Unforeseen costs during the process are inevitable. Unexpected expenses can arise from factors like re-planning, increased foundation/piling costs due to local soil conditions, or additional costs for land reinforcement to prevent subsidence.

7. Establish a Quality Control Department from the Parent Company or Provide Additional Training for Staff to Prevent Discrepancies in Specifications Between Countries.

This preventive step helps businesses maintain product quality, minimize product recall risks, and avoid common damage compensation issues in today’s export markets.

8. Opt for Factory Leasing Instead of Self-Construction to Accelerate Implementation, Disbursement, and Allow Flexible Expansion Based on Needs.

9. Do Not Impose Minimum Wage Levels When Recruiting the Workforce.

Offer 25%-30% above the minimum wage to attract a better labor pool compared to competitors.

10. Use International Payment Banking Services to Overcome Difficulties in International Payments/Transfers or for Issuing LC Accounts, Deposits for Export Shipments.

Foreign banking institutions with branches and representative offices in Vietnam include HSBC, Citigroup, Shinhan, and Standard Chartered, among others. Vietnam consistently advocates for building a healthy and sustainable investment ecosystem, but achieving success still requires a deep understanding of local culture, market dynamics, and the legal context. By leveraging the 10 useful tips above, foreign businesses will find it easier to navigate their business strategies to quickly master the game and the Vietnamese market.