- China may not seem as favourable for market growth in the post-COVID era
- Vietnam may begin a stiff competition with China for foreign investment and trade
- Entrepreneurs and businesses may want to take advantage of the Vietnamese market as the country enters an economic boom
- There are some things to consider when attempting to begin operations in Vietnam
- OML Consulting can help you optimise your entry into the Southeast Asian country’s market
While global markets continue to change in the midst of the COVID-19 pandemic, there is one thing almost certain: China continues to struggle, and Vietnam is picking up its northern neighbour’s slack.
Many companies, both big and small, are beginning to see Vietnam as a viable production center in Asia, launching what may soon become a foreign-investment competition between China and the Southeast Asian country. In fact, Nikkei Asian Review reported earlier this year that tech giants Apple, Google and Microsoft are set to move their phone production plants from China to Vietnam, a shift that stems from the instability of the Chinese market at the height of its virus outbreak at the beginning of 2020.
The large companies that have decided to take advantage of Vietnam’s young, innovative market are not only opening manufacturing plants in the country but will also invest heavily into the country’s economy, helping build infrastructure and provide monetary resources to the nation. This shift potentially marks Vietnam as one of the economic centers of Asia. It is here that entrepreneurs and small businesses may find opportunities to enter the APAC region for a fraction of China’s entry costs.
Even though most people look up to big brother China, Vietnam has been trailing China in terms of GDP growth in 2nd place since 2000, according to the World Bank. From 2019–2020, it will most likely outperform China, an economy which has been put under a lot of pressure. Vietnam’s free trade deal with Europe most likely acts as a primary reason for the country’s impressive forecasted market growth. Hanoi approved the EU-Vietnam Free Trade Agreement earlier this month on June 8th, which will phase out up to 99% of tariffs over 10 years, according to Nikkei Asian Review. The trade deal can take effect as early as August and is expected to boost the nation’s manufacturing and exports sectors as it recovers from the pandemic.
If you are planning to explore and/or start operations in Vietnam, there are several things that are important for you to consider:
- Understanding the market: what is the product or service that you are trying to offer in Vietnam? What is your added value as opposed to potential competitors? In terms of cost, is your pricing competitive and attractive for your Vietnamese customers?
- Where to start?: are you a manufacturer and need to set up production facilities? Are you providing e-commerce solutions? Or do you need a local distribution network? It all depends on the type of business that you run.
- Location — Hanoi, Ho Chi Minh City or elsewhere: Hanoi is the capital of Vietnam, but Ho Chi Minh City is leading in terms of business. It is comparable with China where Beijing is the capital, but Shanghai is more important for business. However, if you want to reduce your capital expenditure, you may want to invest in office locations just outside of these major cities or in special economic zones with tax benefits and other incentives.
- Skilled labor/personal: a key factor to a successful business is being able to attract talented, well-educated, and motivated employees. The cultural and language differences are important hurdles that you need to take into consideration.
- Cash management and taxes: the Central Bank of Vietnam has strict regulation with the in- and outflows of money. Before you set up your business in Vietnam, you need to understand what is needed to bring money into the country. More importantly, if your business is profitable, how can you extract money out of Vietnam? To do business in Vietnam, you also need to abide by the local taxation regulations, which requires additional attention.
How can we help you in Vietnam?
- In order to optimize your investment, it often pays if you spend some of your budget to have a market study or market research done prior to firming up your plans to move in. We assign an advisor, who will help the client retrieve relevant insights quickly, so the client and the board can make intelligent decisions.
- If the client knows what they are looking for, when entering the market, we can help with scouting for the most convenient location for the business operation. We are in contact with local government officials and can share with you the benefits that they offer.
- The next step will be to help guide and assist in the setting up of the office and/or business. We provide a local team that speaks English well but also understands the local business culture well.
- If the client needs us to assist with recruitment of local staff, as well as training of the staff, we work closely to define the requirements and competence levels. Once staff members have been hired, the training process starts, we will be able to provide tailored staff development programs.
During the entire process we have one of our senior partners and/or functional experts involved. We make use of online collaboration tools to minimize the use of e-mails and optimize the interactions with the team, so that you are up-to-date on the process every step of the way.
For a private investor who recently approached us for our expertise in helping him kickstart his investment process in Vietnam, we implemented an elaborate three-step plan to help meet his goals. First, we arranged a meeting with him to better understand his business requirements and concerns. Second, we completed thorough market research through direct and reliable sources to ensure that our client’s needs were met. Last, we traveled several times to Vietnam with the client to visit suitable properties for his investment, providing him with our savvy advice and recommendations throughout this process. We also helped him with all the relevant documentation to ensure a seamless and painless transition. The client greatly appreciated our assistance and advice and expressed his interest in working with us again for his future investments in Vietnam.
OML your trusted partner
Are you looking to make your first step in Vietnam and want to take advantage of one of the fastest growing markets in Asia for decades to come? Please contact us TODAY for a free consultation and we will be happy to assist you. You can book your appointment by emailing [email protected] or [email protected].
About the authors
Liang Tan is the founder of OML Consulting and has worked in the hospitality and technology management consulting industries for about two decades. He has provided consulting services to a variety of clients in different industries, ranging from technology start-ups to government institutions. Clients in Vietnam are in the hospitality, construction and real-estate industries. With focuses on delivery, operations, product development, and strategy, he strives to assist clients in business excellence.
Vanessa Doan is a partner at OML Consulting and works as a cross-cultural business consultant, attempting to help form connections among businesses in Singapore, Vietnam, and Europe. She has recently helped a client with investments in residential real-estate in Ho Chi Minh City. As a native Vietnamese, she is using her expertise and local connections to actively assist overseas buyers to outsource PPE suppliers in Vietnam to export to Europe and South America amidst the COVID-19 crisis.