Are you into infrastructure, pharmaceuticals, and digital technology business? Looking to expand your business to grow overseas and looking for the most suitable, nearest country for the same? Your search comes to an end here. The country is none other than Vietnam.
Vietnam is a social republic and a one-party state, allowing political stability. This has also translated into a reliable business environment allowing businesses to perform their best.
Not only these conditions, but specific trends are also driving further increases in the country’s inbound investment, and making Vietnam a chosen country for companies from not just Asia but around the world who look forward to:
1. Diversify their presence in Asia outside of China;
2. Easy access to markets;
3. Leverage attractive free trade agreements, manufacturing of (infra and pharma), and tax incentive advantages.
Asian Diversion:
Instead of investing in China, many companies are looking to Vietnam as a safer alternative to other Asian nations for specific manufacturing, product assembly, and other downstream services. Recent disruptions to the global supply chain and commerce, national border closures and lockdowns, increased labor costs, and other factors have made Vietnam more competitive than China in certain areas.
International Trade Supremacy:
Vietnam has excellent shipping connections to important markets such the US, Europe, and other Asian regions thanks to its advantageous location in Southeast Asia. Reduced international freight costs and a high level of trade openness are the results of this strategic orientation. Vietnam’s attraction to foreign investors is increased by its competitive corporate tax rates and manufacturer incentives.
Background of Free Trade and Tax Agreements:
Vietnam’s rise as a devoted and capable trading partner for the international community was signaled by its 2007 admission to the World Trade Organization (WTO). Since then, the nation has ratified a large number of free trade agreements (FTAs) and agreements to avoid double taxation (DTAs), the goals of which are to end double taxation and set trade terms that nations impose on imports and exports. Vietnam’s decision to open its borders and economy, Numerous industrial zones, and discontinuing any previous quarantine or lockdown policies, to make it highly accessible for business, travel, and normal living and mobility.
Free Trade Agreements:
Vietnam’s membership in the ASEAN (Association of Southeast Asian Nations) bloc grants it participation in the following key multi-regional Free Trade Agreements (FTAs):
1. RCEP (The Regional Comprehensive Economic Partnership),
2. EVFTA (The EU-Vietnam Free Trade Agreement).
3. CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership)
With direct trade advantages with these nations —Australia, Brunei, Burma, Cambodia, Canada, Chile, China, Indonesia, Japan, Laos, Malaysia, Mexico, New Zealand, Philippines, Singapore, South Korea, Thailand, United Kingdom, Vietnam, and countries in the Eurasian Economic Union – Vietnam is a signatory to over a dozen bilateral and multilateral free trade agreements.
Vietnam is now engaged in negotiations for future agreements with the European Free Trade Association and the Vietnam-EFTA Israel (the Vietnam-Israel Free Trade Area), which is composed of Switzerland, Norway, Iceland, and Liechtenstein.
Tax incentives:
Incentives for corporate income tax (CIT) are provided to foreign and domestic investors to encourage investment in fields or industries aligned with national development plans. Preferential tax rates, or lower tax rates, and tax holidays, or temporary tax exemptions from taxes for the duration of the project, are the two primary forms of CIT incentives in Vietnam. Tax breaks are used in Vietnam to promote investment in specific areas. These include the sectors that the government considers to be most significant, such as those that fall under the categories of “high tech,” “large scale,” or “socially important.” A range of favored tax rates for predetermined periods are also available to investments made in businesses that will operate in areas that the government designates as disadvantaged or highly disadvantaged.
Double Tax Avoidance Agreement:
By defining exemptions or lowering the total amount of taxes owed in Vietnam, these agreements have been proven as a huge step towards successfully ending double taxation in Vietnam As of 2022, Vietnam had signed DTAs with more than 80 nations and territories. By defining exclusions or lowering the amount of tax that residents of the signatory countries must pay in Vietnam, these accords prevent double taxation.
Vietnam-India Relations:
Vietnamese Prime Minister Mr. Pham Minh Chinh called for stronger economic cooperation with India, at the Vietnam-India Business Forum, aiming for about 20 billion USD in bilateral trade. Speaking in New Delhi, during his recent visit to India for the inauguration of an infrastructure project, he highlighted opportunities in infrastructure (accounting for 5.7% of the GDP) it’s the highest in Southeast Asia, pharmaceuticals, and digital technology on a large scale. He cordially invited Indian businesses to invest in Vietnam, focusing on strategic sectors and integrating Vietnamese companies into their supply chains. He shares his vision of mutual benefit through the trade policies which are yet to be modified for the same.
He further shares his vision of establishing India’s proper pharmaceutical ecosystem in Vietnam as it imports 33 percent of its pharmaceutical products from India.
Conclusion:
Vietnam is a unique place to start any business because it provides a dynamic blend of economic growth, business-friendly legislation, and a thriving market. With its young, tech-savvy workforce, open company rules, and advantageous position in Southeast Asia, it’s the perfect place for entrepreneurs looking for new ventures. Vietnam’s distinct advantages – such as affordable operating expenses and a strong infrastructure – position it as the next best location to launch a business as attention turns from developed markets to developing ones. By embracing the Vietnamese market now, you might open up a lot of potential and set yourself up for success in this quickly changing region in the future.
