Despite the devastating effects of the covid-19 pandemic, Vietnam’s growth remains positive in terms of Foreign Direct Investment, with over US$15.2 billion paid-in capital from foreign investors as of June 20, 2021. While the country remains a destination for foreign investors across the globe, there is a wide spectrum of lucrative investment opportunities for Malaysian businesses.
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With a keen interest in Vietnam’s burgeoning market, Malaysian investors have been eyeing potential sectors such as real estate, renewable energy, pharmaceuticals, construction, and manufacturing. Malaysian investors’ total investment capital in Vietnam reached $12.76 billion as of July 2021, accounting for roughly 3.6% of overall FDI in Vietnam.
In this article, we will discuss in brief 8 optimum reasons for Malaysian investors to invest in Vietnam.
Reasons For Malaysian Investors to Invest in Vietnam
1, Malaysia-Vietnam Bilateral Relations
Ever since the commencement of their diplomatic relation in 1973, the two countries have extended cooperation in every field, be it politics, diplomacy, defense, security, economics, or culture. Owing to their effective collaboration at the regional and global forums like ASEAN and the UN, the mutual economic growth has attributed to the hike in bilateral trade revenue, with an estimation to reach US$25 billion by 2025. Moreover, Malaysia is Vietnam’s 6th largest trading partner and 8th largest investor (source).
2. ASEAN Free Trade Agreement (AFTA)
Through AFTA’s primary mechanism, Common Effective Preferential Tariff (CEPT), Malaysia and Vietnam were able to establish an agreement to eliminate import duties on all products except for some sensitive products. As a result of this agreement, Vietnam’s rapid growth will be accelerated, and Malaysian businesses will be encouraged to participate actively in the process.
3. Government Incentives For FDIs
Many emerging economies limit foreign ownership of certain industries. Most industries in Vietnam, on the other hand, are open to foreign direct investment (FDI). Additionally, the government created incentives to encourage foreign investment, including lower corporate income tax rates or exemptions from the tax for certain industries, exemptions from import duties on specific goods, such as raw materials, and reductions or exemptions from land rental and land use taxes.
4. Promising Economic Growth
Vietnam’s economic growth rate is among the quickest in the world. Every year, Vietnam’s GDP grows at a steady 6.81%. Despite the pandemic, robust exports boosted Vietnam’s gross domestic product by 4.48% in the first quarter of 2021.
5. Improved Infrastructure
Construction and development of expressways, airports, and ports are top priorities for the Vietnamese government. Both Ho Chi Minh City and Hanoi have new metro lines under construction. Modern transportation, shipping, and telecommunication networks, which are part of Vietnam’s extensive and modern infrastructure, are extremely beneficial to Malaysian investors in terms of costs, productivity, and efficiency.
6. Vital Geographic Position
Its placement at the center of the ASEAN area makes Vietnam a vital hub for the nations that surround it. Divided by the South China Sea, Malaysia is positioned on the opposite side of Vietnam in the southwest. There are several prospective markets within a short distance, with China being the most noteworthy. The South China Sea and Southeast Asian neighbors with abundant labor, natural resources, and skilled human resources are easily accessible from the country’s long coastline. The key places where Malaysian enterprises may launch their businesses are Ho Chi Minh City and Hanoi.
7. Young and Skilled Population
The majority of Vietnam’s population is young, and it is expected to rise in the coming decade. Vietnam has 97 million citizens, with a median age of 32.5 years. Vietnamese talent pools and labor forces will therefore become more numerous and more proficient in the near future. The government’s efforts at standardizing education and scaling the literacy index make the youth an ideal skilled resource to contribute to investment causes.
8. Relatively Low Setup Costs
In Vietnam, there is no minimum capital requirement for the majority of commercial establishments. However, one must show that they have sufficient capital for the firm they are planning to start. Financial resources are needed for startup costs, as well as operating expenses until a firm is self-sufficient. As a result of recent updates to investment laws the minimum capital requirement is now at 40,000USD.
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