Vietnam business environment has gradually become more stable and profitable, as it has already been the third largest market in Southeast Asia and one of the fastest-growing economies in the world. However, this economy still contains many problems
Vietnam business environment has gradually become more stable and profitable, as it has already been the third largest market in Southeast Asia and one of the fastest-growing economies in the world. However, this economy still contains many problems that require investors to have certain knowledge in order to cover before entering into business in this nation. In this article, we present you the top 5 reasons why you should be careful if you invest in Vietnam.
1, Shell corporation scams
Obviously, shell corporation scams are very common not only in Vietnam but also in all other countries in the world. The concept of a shell corporation is quite simple: a company or corporation that exists only on paper and has no office and no employees, but may have a bank account or may hold passive investments or be the registered owner of assets, such as intellectual property, or ships. Normally, tricksters open up a lot of shell corporations and then engage them in many sectors to have an online relationship with foreign companies. Afterward, no matter this company purchase, sell or do any kind of business, if it encounters profit, it will be erased from the market and leave its partner(s) with a big loss. Unfortunately, there has no data on how many shell corporations in Vietnam, but we can take a quick glance through the basic information of companies in Vietnam provided by VietnamCredit above.
2, Lack of high-technology
Vietnam’s backwardness in technology is dragging down its economic growth. As the country is trying to leave its mark on the global economy, it has no other option but to move up the value chain and away from the traditional low-wage, low-tech model. There has been some success. Statistics show that high-tech products contributed 32.5 percent of the country’s gross domestic product in 2017, up from 3.2 percent in 2016 and 4.6 % in 2015. However, these figures were not as expected, pointing to the fact that Vietnam is still difficult to provide better access for hi-tech investors.
3, High-quality human resources scarcity
Vietnam is well-known for its creative and intelligent human resources, but it seems unreal when many companies still in need of high-quality employees. There has some reason for this paradox which is a barrier for many corporations to launch a business in Vietnam. On the first hand, some of the young intellectuals want to work abroad where they expect to have better working environments and conditions than in their nation. Meanwhile, the updating of training methods at the local universities and vocational training schools has been slow. This seems to be another reason why a number of graduates from local educational establishments have not met the recruitment requirements of the large FDI businesses.
4, The complication of the law
It goes without saying that Vietnam has a complex and often confusing regulatory environment. Investors must carefully navigate the myriad rules and regulations that cover all aspects of business activity. Vietnamese regulations involve a complex array of national laws (which are often akin to broad-reaching policy documents) and implementing rules in the form of decrees and ministerial circulars. Local agencies may also have their own set of procedures. What makes maneuvering through this system all the more difficult is that other companies, including competitors, may appear to be ignoring the regulations with impunity. This may make willful non-compliance tempting for some. But non-compliance is not advised, and will often lead to disastrous consequences.
5, Employee fraud and crime
Employee fraud should be a major concern for foreign companies. Fraud often takes the form of employee theft or embezzlement, but Vietnam's labor regime makes it difficult to terminate workers; even those found to have embezzled company funds or committed some other form of white-collar crime. As a result, the best protection is to have systems in place that can prevent or minimize the risk and damage of such occurrences in the first place.
Six common examples of employee fraud include direct misappropriation of company funds or embezzlement of ‘marketing' or ‘promotion' funds in representative offices; submitting false invoices and receipts; taking kickbacks from vendors, employees or potential employees to induce a promotion or hiring; misstating financial statements; using undisclosed economic interests to their advantage (conflicts of interest), and other forms of collusion with third parties (such as consultants and suppliers).
(Written by Christian Duong - VietnamCredit)