Economic bilateral ties between India and Vietnam
Economic relations between Vietnam and India are setting new benchmarks in the trade and investment sector. Bilateral trade between the nations has been steadily rising over the past two decades with significant scope for trade in pharmaceuticals, oil and gas, and IT services.
Economic cooperation saw a huge spike of US$ 1 billion to US$ 7.6 billion between 2007 to 2017 and is being constantly nurtured and developed with economic investment and trade agreements. The past two decades saw steady growth from US$200 million in 2000 to US$12.3 billion in the financial year 2019-2020. Exports from Vietnam to India include electronic components, machinery, natural rubber, chemicals, and coffee whereas its key imports from India include meat and fishery products, corn, steel, pharmaceuticals, cotton, and machinery.
According to Vietnam’s Foreign Investment Agency, India is working on approximately 300 projects with a total invested capital of US$ 898.65 million as of December 2020, ranking 26th amongst countries investing in Vietnam.
Free trade agreement and its impact on economic bilateral relations
The ASEAN-India Free Trade Area (AIFTA), which Vietnam is a part of, was established in 2009 as a result of convergence in interests of all parties in advancing their economic ties across the Asia-Pacific. Moreover, the signing of the ASEAN-India Trade in Goods Agreement carved the way for creation of one of the world’s largest FTAs – consisting of 1.8 billion people with a combined GDP of US$ 2.8 trillion. The ASEAN-India FTA proposes tariff liberalisation of over 90% of products traded between the two dynamic regions, including “special products,” such as palm oil (crude and refined), coffee, black tea and pepper.
The free trade agreement between both the nations have further bolstered trade and investment in various sectors and have significantly improved the morale of Indian investors to invest into the mushrooming market of Vietnam.
Promising sectors for Indian investment in Vietnam
Backed with increased access to markets, favorable investment policies, free trade agreements, economic growth, political stability, low labor costs, and young workforce, Vietnam gives every wise foreign investor a strong reason to invest in the country. Following are some of the sectors that show great potential for foreign investors to leverage untapped opportunities available in the country:
Pharmaceutical: Government is actively trying to get Indian pharmaceutical companies to manufacture in Vietnam as the domestic pharmaceutical industry is currently able to meet just 53% of the country’s demand. It represents significant opportunities for Indian investors as India is among the leading global producers of generic medicines supplying 20% of total global demand by volume.
Agriculture: There is a plethora of untapped opportunities for investment in areas like breeding technology, irrigation technology, and storage facilities. Vietnam’s topography, climate, and fertile soil makes it ideal for coffee plantations and has gained attention from the TATA group which has expressed plans of investing in the installation of agricultural machinery to fulfil the demand in the Mekong Delta.
Tourism: The potential of the tourism industry in Vietnam is largely untapped. Considering the country’s bolstered economy and proactive government campaigns, chances for the travel sector to rebound after the pandemic looks very promising.
Supporting industries: Foreign investors can leverage Vietnam’s assortment of free trade agreements with several countries and gain competitive advantage by allowing products to be exported to these countries with attractive low tariffs.
How Cekindo can Assist
The company registration process has been simplified by the government, however it could be a herculean task for some companies. There is no rule of thumb while selecting the type of company registration, as every business is different and has its own nuances. Hence, in order to register a company, a foreign investor has the following options:
- Representative Office (RO): RO is ideal for investors looking to assess the overseas market conditions before expanding. Such entities are not allowed to conduct business activities that generate income.
- Limited Liability Company (LLC): Single investors can take advantage of its simple corporate structure, which requires one founder only, thus making it ideal for small and medium-sized enterprises (SMEs).
- Branch: Owners of branches in Vietnam are entitled to conduct all parent company’s business activities and make a profit without incorporating a separate legal entity. Therefore, a branch serves as an extension of its parent company.
- Joint-Stock Company (JSC): Recommended for medium and large-sized businesses as its corporate structure is complicated and requires a minimum of three founders. Furthermore, its registration process is often delayed due to more demanding requirements.
The incorporation process of each legal entity type is different and takes from 1 to 3 months.
In order to make the complete registration process seamless, Cekindo’s consultants can bridge the gap between where you are and where you want to be by providing comprehensive business solutions to set up for success.
To know more about how Cekindo’s solutions can help you register your company in Vietnam, please fill out the form below or talk to an expert on our chatbot.