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Companies choose Vietnam for investment

Companies choose Vietnam for investment

Friday 23, 04 2021
International companies have been choosing Vietnam to establish their branches and factories, and this tendency has been increasing over the last few years. Let's see why this is the case.

Have foreign companies chosen Vietnam in past years?

The answer is “yes”, but not much.

Vietnam has one of the fastest-growing economies in the world. This factor plays a part in the decision of companies to choose Vietnam as a potential partner to establish their business.

Vietnam was considered a less risky investment destination by 65% of Foreign Invested Enterprises (FIE) in 2015. According to that year's PCI report, Vietnam had lower tax rates, lower expropriation risk, better opportunities, policy influence, and lower policy uncertainty than their competitors in the field of attracting foreign investment.

However, the remaining FIEs at the time still considered Vietnam as a less attractive destination due to corruption, regulatory burdens, quality of public services (such as health care, education, utilities). The quality and reliability of infrastructure, particularly macroeconomic risks and regulatory risks, were also the major concerns. Because of these factors, Vietnam had remained a less considered choice for international companies when it comes to deciding a destination for their investments. In 2016, it was reported that almost half the number of foreign investors had considered financing in countries such as China, Thailand, and Indonesia before choosing Vietnam. Other notable competitors of Vietnam are the Philippines and Laos. Among these countries, China remains the most invested in, with much international business locating their factories in the land.

Have foreign companies chosen Vietnam in past years?

The destination is shifting

The PCI report of 2020 showed that foreign direct investment (FDI) enterprises are still viewing Vietnam as an attractive investment destination, with the advantage of stable politics and an improvement in administrative procedures. 90% of FDI enterprises perceived that the political situation, which is deemed a vital element when it comes to the decision of investing in any country, was constant and stable in Vietnam. 82% of the companies recognized Vietnam as having less risk of policy instability, and 80% saw that Vietnam had fewer risks of revoking business premises. These rates indicated that the changes made over the years in policies to attract foreign investment were proving effective.

The destination is shifting

There has also been a change in the destined place of investment for big companies worldwide, especially when the COVID-19 pandemic strikes. Since the pandemic broke out, many factories of international companies in China had shut down, which resulted in Vietnam becoming a new, promising option. Many foreign companies have considered relocating factories to South East Asia, especially Vietnam.

Opportunities in 2021

In recent years, the opportunities to successfully start a business in Vietnam have increased. Over the past years, within the context of worldwide economic integration, Vietnam has been participating actively in negotiating and signing Free Trade Agreements (FTA). These agreements will enable better development for Vietnam’s economy; in the meantime, they will also create opportunities for foreign businesses to invest in Vietnam more easily and conveniently.

Opportunities in 2021

Vietnam has also managed to control the COVID-19 pandemic quite successfully. Therefore, the economy of Vietnam keeps growing strongly throughout the year 2020. This strong economic run will likely continue in 2021, which will open up many possibilities for foreign investors to indulge more in developing their business in Vietnam.

In general, Vietnam - with the economy that managed to stay active when economies around the world somewhat froze, along with the benefits brought about by signing FTAs over the past years; is becoming a potential investment spot for international companies. It is now a good time for companies to choose Vietnam as a promising investment destination.

 

Compiled by VietnamCredit

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