Posted 6.03. 2020 by Cekindo
Vietnam is considered one of the potential investment markets across Southeast Asia. Stable economic growth is one of many factors that attract foreign investors to take part in it. ASEAN Free Trade Area (AFTA) agreement that had been signed by all ASEAN members change the investment roadmap. Business scope changes gradually, from domestic to the global range.
Foreign direct investment (FDI) begins to get more attention, especially from a company that has a big plan to expand its business in other regions. In Vietnam, some local companies convert their business model to FDI to change the business scope.
Before converting your company into an FDI company in Vietnam, here is what you need to know.
Foreign direct investment is an investment practice established by an individual or firm in one country broaden in another country.
Foreign Direct Investment indicates investment by foreign parties to get a lasting interest. Lasting interest can differ from an FDI company from another type of investment model because investors hold securities passively from other countries.
According to Vietnam regulation, foreign direct investment can be made in three forms: doing business-to-business contract agreement, building a joint venture, and establishing 100% foreign capital company. Those forms are common ways to create an FDI company in Vietnam.
Generally, there are three types of a foreign direct investment company, horizontal, vertical, and conglomerate.
Horizontal means a business expanding the operations to other countries. The business holds the same work but in other countries.
Meanwhile, vertical FDI occurs when a business expands to other countries by changing the supply chain. It means a company holds different works abroad but still related to the main core.
Another type of FDI is conglomerate. A conglomerate type is where the company builds a foreign investment in a certain business that is not related to the existing business. This type of FDI is often applied by holding a joint venture. It is because the new business does not have a connection to the old ones.
Foreign direct investment has some advantages for both the foreign host country and the investor. Some of them are tax incentives.
As mentioned above, the Vietnam government upholds its commitment to ensuring foreign investment can hold its business as planned. Tax incentives indirectly give impacts to laboUr costs.
By carrying out an FDI, a company can spend lower laboUr costs.
The government of Vietnam improved its judiciary system specifically for economy and investment since 1987. Foreign investors are given tax incentives. It was one of the Vietnamese government’s commitments to encouraging foreign investment in the country.
The country’s demographic structure helps foreign investment to enter several sectors. Vietnam’s population, of which 60% are in working age, is possible for any kind of investment. Then, the country’s living cost is one of the cheapest ones in Southeast Asia. Socio-political stability also has an important role to attract foreign investments.
In Vietnam, the number of FDI companies gradually increases each year, especially since the regulation signed in 1988 to guarantee the existence of foreign investment.
FDI in Vietnam is projected to grow, which will stabilise the position of Vietnam as one of the major Asian countries in terms of investment attractiveness.
Investment law in Vietnam protects investment capital and its interest. Simple procedures also encourage more foreign investments.
You can convert your company to FDI to get all the benefits. The first thing you need to do is set up your own business. Prepare your global business with Cekindo.
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