Foreign direct investment in Vietnam: all you need to know before investing
In Vietnam, foreign direct investment can take the form of a business cooperation, a joint venture, or a 100% foreign-owned company. Incentives continue to be created by the Vietnamese government to promote and secure foreign direct investment in Vietnam.
1 / What is foreign direct investment in Vietnam?
Foreign Direct investment (FDI) denotes investment by foreign entities that acquire a lasting interest in a local entity. Specifically, according to Vietnamese law, a foreign direct investment in Vietnam can take three forms:
- Business cooperation with a business cooperation contract
- Setting up a joint venture
- Establishment of a 100% foreign capital company.
2/ Why undertake foreign investment in Vietnam?
Since 1987, the Vietnamese government has been committed to opening up the economy and to introduce reforms based on a market economy. The government is improving its judiciary system, leading a strategy of political and tax incentives for foreign investors, and is working hard to uphold its commitments to the international community.
Vietnam is now favourable for foreign direct investment:
- Liberalisation of key sectors of the economy: Vietnam has gradually shifted from communism to a market economy. The country first liberalised agriculture, industry and services. The government has started to privatise key sectors of the Vietnamese economy. The number of companies owned by the state has fallen from 12,000 in 1993 to fewer than 3,000 today.
- Socio-political stability: this is one of the main assets of the country. The government, aware that its desire to attract foreign investment meant that it was necessary to stabilize the country both politically and socially, has undertaken reforms in this direction, making Vietnam an attractive and stable country for investors.
- A demographic structure conducive to FDI: The Vietnamese population is characterized by a young population of which 60% are of working age. Vietnam also has a cheap and increasingly technologically skilled labour market.
- An attractive location: Vietnam is located in the heart of Southeast Asia, the region driving global economic development.
- Strong economic growth: For ten years Vietnam has experienced an average growth rate of 6%. The economic prospects are positive in terms of growth despite the global economic and financial crisis.
The government is implementing measures to attract investment with its Law on Foreign Investment in Vietnam and is implementing reforms, the main features of which are an openness to foreigners and private operators. Incentives continue to be created, facilitating foreign investment (tax exemptions etc.).
3 / The spectacular rise of foreign direct investment in Vietnam
FDI (Foreign Direct Investment) has increased considerably since the authorisation of foreign investment in 1988. According to forecasts, FDI will continue to grow, which will consolidate the position of Vietnam as a major Asian nation in terms of attractiveness for investment.
In 2014, FDI inflows accounted for 9,200 million US dollars, while the stock of FDI amounted to nearly 91,000 million, or just under 50% of GDP.
4 / Guarantees related to foreign direct investment in Vietnam
Investment law protects property rights for investment capital and the legitimate interests of foreign investors. It creates favourable conditions for them and simple and expeditious procedures when investing in Vietnam. Foreign entrepreneurs investing in Vietnam and foreigners working there are allowed to transfer money abroad in many cases. Vietnamese courts or arbitration organisations are available to foreign investors.
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- The law on foreign direct investment in Vietnam