Vietnam is a potential market which have attracted thousands of foreign investors from many countries such as Japan, Korea, India, New Zealand, etc. However, investors may need to know that there are many obstacles and difficulties when doing business in this market.
We have summarized the following 10 major challenges:
When establishing an FDI enterprise, a foreign investor must strictly follow the papers and procedures such as registration of investment and business licenses according to the provisions of Vietnamese law. In addition, the language diversity is also a huge barrier, making investors confused when registering their business lines. This is not to mention conditional business lines, and business lines that restrict foreign investors according to the WTO commitments and bilateral agreements between Vietnam and other countries.
It takes 110 days for state inspections to be completed before a construction permit is issued. If foreign investors want to rent an office in Vietnam, they must also submit the contract, and show proof of ownership of the owner of the building altogether with many other complicated papers.
Supply of power
It takes 115 days for foreign investors to access electricity for the office. It should also be noted that power supply will take place after safety inspections conducted by the State are done.
Registration of property
The process of registering property of businesses in Vietnam is the most time consuming in East Asia and the Pacific (compared to Australia, China, Thailand, Japan, Singapore …). It takes businesses up to 57 working days to complete the property registration.
Human resources in Vietnam are abundant but there exist several limitations in culture, style, and skills. This requires employers to have appropriate solutions for recruiting, training, exploiting and using, which may cost a lot of resources. In addition, businesses must also comply with the provisions of the law on labor relations, social insurance, health insurance, labor unions, etc.
Vietnam’s business law
The business environment and the related legal system of Vietnam are in the process of being completed, that is why businesses may be faced with unforeseen risks due to frequent changes.
There are total of about 32 taxes for businesses, which may take a business 872 working hours to fulfill its tax obligations. While the average time to perform tax obligations of the countries in East Asia and the Pacific region is only about 209 hours. That is why many businesses choose consulting companies to save time and costs when doing business in Vietnam.
Despite the fact that there have been positive changes, complex procedures are still a barrier for international trade activities in Vietnam.
Contract execution and insolvency settlement
In Vietnam, enforce of contracts takes 400 days to complete with 34 procedures. Solving insolvency is a more labor-intensive process. To complete bankruptcy procedures, it normally takes an average of three years.
Vietnam has a Confucian background, emphasizing the importance of social relations, which requires investors to understand in order to optimize business activities. In addition, Vietnam is also a centralized state, and public opinion has always greatly influenced individual needs or businesses.
With a large population and potential for economic development, Vietnam will surely attract foreign investors in the near future. However, when deciding to invest in Vietnam, foreign investors need to thoroughly study Vietnam’s business laws, business environment, as well as its culture and people to minimize risks and costs.
Alice Hoang Thao – VietnamCredit