As an emerging market, Vietnam provides fantastic opportunities to entrepreneurs looking to time the market and fill the market gaps. This article has been written by our editorial team which has drawn on the experience of our business consulting team baked by market research and pinpointed certain areas that we recommend for small business owners and entrepreneurs looking to capitalize on one of the world’s most interesting emerging markets. This is based on market gaps in rising industries in Vietnam.
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1. F&B Business
One of the most appealing industries in Vietnam is its food and beverage (F&B) sector. BMI (Euromonitor) ranked Vietnam 10th in Asia as the world’s most lucrative food and beverage market in 2019. Vietnam’s rapid development has created plenty of room for the expansion of foreign food & beverage brands.
In recent years, the Vietnamese middle class, especially the younger generation, has been spending more on experiences-based dining. They like documenting their experiences in pictures and videos and sharing them on social media. With the deeper penetration of smartphones in the country along with a social media-savvy younger population, eating out is quite popular, especially in cities such as Ho Chi Minh City, Danang, and Hanoi.
As Vietnam’s economic engine, Ho Chi Minh City draws foreigners from around the world to work in its booming service and technology industries. Consequently, there is a vibrant F&B industry offering a wide variety of cuisines from around the world, along with fusion concepts created by Western-trained chefs using local ingredients combined with standardized culinary tactics. Another trend that is exploding in Vietnam, partially driven by social media is experience-driven dining.
Based on our experience in the Vietnamese market the best investment advice we can offer for the F&B Sector is:
Entrepreneurs interested in exploring this sector ought to invest in the development of F&B technology platforms, like blockchain tech.
Why? This is very underdeveloped, and due to the high penetration of mobile phones, especially among young people in the country’s largest cities, it is ripe for investment opportunities.
2. Real Estate and Property
According to a recent report, Vietnam’s real estate industry has been growing as the economy recovers from COVID-19 and is expected to witness further development in the coming years.
As a result of the government’s economic incentives, interest rates remain low, public investments are released faster, foreign investments continue to flow into Vietnam, and remittances remain steady.
The Report predicts that the real estate market will grow in the short term because of people’s purchasing power and income expectations irrespective of the government’s initiatives.
There is an economic support package for the infrastructure sector worth USD 15.3 billion, as an incentive from the government. As a result, the real estate market will not only be directly influenced in the short term but will also be driven forward in the future.
Apart from the global recovery from the pandemic, urbanization and the rise of the middle class also affects the development of the real estate industry. There is also a great deal of impact on the demand for luxury apartments, resort properties, and land plots besides the increasing number of privately-owned cars due to the quick growth in Vietnam’s upper class.
Our Investment Advice:
Foreign realtors can leverage favorable conditions of Vietnam’s mushrooming real estate industry by investing in properties and yielding positive ROI over the next 10 years.
Continue reading Buy Property in Vietnam as a Foreigner: Why and How.
3. Tourism and Hospitality
The tourism and hospitality sector in Vietnam is witnessing a rise in the interest of investors. In the period 2022-2026, the country’s hotel market is expected to grow by USD 2.12 billion at a compound annual growth rate (CAGR) of 14.43%.
The Vietnamese hotel industry is being driven by several factors, including rising disposable income, increasing affordability, and growing foreign investment.
Essentially Vietnam still has visa restrictions and does not promote its tourism industry
Our Investment Advice:
Entrepreneurs looking for new horizons in the Tourism sector can invest in the development of Tech-based booking platforms
4. Dropshipping & Fulfilment
As reported by the Vietnam General Statistics Office, Vietnam’s economy expanded by 5.03% in the first quarter of 2022, beating China’s growth rate of 4.8%. China’s loss of foreign investment and increase in foreign companies moving out of the country has been recently compounded by its zero-covid policy
With cheaper land-buying rights, labor wages, and operational expenses for factories, Vietnam may soon replace China as the world’s manufacturing hub. As a result, many drop shipping agents will also migrate to Vietnam.
Moreover, Vietnam’s foreign trade rose to USD 176.35 billion in the first quarter of 2022, up 14.4% from a year earlier. On the other hand, Chinese foreign trade increased only by 10.7%.
RELATED READING: Vietnam: One of the Most Promising Startup Hubs in Southeast Asia
5. Export Industry
Vietnam is the second largest exporter of coffee in the world. Many products sourced and produced in the nation are in high demand, including rice, rubber, leather, timber, electronics, and textiles. Thanks to its ratification of 14 free trade agreements with over 50 countries around the globe, including the new Vietnam-EU Free Trade Agreement, exports from Vietnam are booming thanks to the new drop-in tariffs. Finally, Vietnam is a cost-effective place for production due to its cheap labor and land prices, as well as its attractive tax incentives.
Our Investment Advice:
Vietnam will continue to be a destination for supply chain diversification and an attractive market for foreign investment in the days to come. With the manufacturing switch from China to Vietnam, Amazon forwarding services (FBA) are likely to be in high demand soon and now would be the right time to invest.
How to Start a Small Business in Vietnam
Company Registration Options
In Vietnam, there are two types of business entities that are suitable for foreign investors or small businesses, as follows:
Limited Liability Company (LLC): Widely favored by foreign investors seeking to set up their business in Vietnam, particularly for small and medium-sized enterprises. An LLC can be established by a single founder and have multiple founders, ranging from 2 to 50 members.
Representative Office (RO): Foreign investors can set up a Representative Office (RO) in Vietnam to gauge market dynamics before making significant commitments. However, it’s crucial to note that an RO cannot generate revenue. Its scope is limited to hiring local employees, conducting market research, and managing contracts with local businesses.
- Legalized Copies of Foreign Documents (Passport, Bank Statements ETC)
- Apply for an Investment Registration Certificate (IRC)
- Issue an Enterprise Registration Certificate (ERC)
- Initial Tax Registration and Submit to the Tax Department
- Submit a declaration of Business License fee (go to tax section)
Taxes in Vietnam
Personal Income tax (PIT): Only when the company has employees with valid labor contracts, pays their salaries, and subsequently submits the Personal Income Tax (PIT) declaration.
Value Added Tax (VAT): It is compulsory for all businesses. Items that are liable to Value Added Tax (VAT) include goods and services utilized for production, trade, and consumption within Vietnam.
Business-License Tax: It is required to be submitted on an annual basis. Small businesses that have recently transitioned from business households, as well as certain other circumstances, may be eligible for exemption from this type of tax.
Corporate Income Tax (CIT): CIT tax payment (which amounts to 20% of the profit) is only required if the company generates a profit during the quarter.
HR – Recruitment and Payroll
Social and Medical Insurance: In Vietnam, social insurance, health insurance, and unemployment insurance are provided to all full-time employees. It is mandated by labor laws that employers make contributions to these social insurance programs. The Vietnamese labor code regulates contracts, working hours, and norms related to employment.
Personal Income Tax reporting & tracking: It involves individuals reporting their income and fulfilling their tax obligations, including regular reporting of income and deductions, and tracking the payment of taxes. Compliance with the regulations is essential to avoid penalties and ensure accurate and timely tax reporting.
Consultation about employment and labor relationships: It involves seeking advice and guidance on matters such as employment contracts, working conditions, employee rights, and legal obligations for both employers and employees. Professional consultation can help ensure compliance with labor laws, resolve disputes, and establish harmonious and fair employment relationships.
InCorp Vietnam is a leading provider of global market entry services. We are part of InCorp group, a regional leader in corporate solutions, that encompasses 8 countries in Asia-Pacific, headquartered in Singapore. With over 1,100 legal experts serving over 15,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business perfectly fit into the market with healthy growth.
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