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5 Reasons Why European Investors Should Invest in Vietnam

Traditionally, investments to Vietnam have been coming from United States and gigantic Asian economies such as South Korea. However, in recent years, the Vietnamese government has made a concentrated effort to make Vietnam more welcoming for European investors. Resulting from this effort, the position of Europe as a FDI partner of Vietnam has gradually heightened, and from the perspective of an European businessperson or investor, there are multiple reasons why Vietnam is a good destination to set up business.

       1. Geographical Location

      Location of Vietnam

Located at a central location within the ASEAN region, Vietnam offers a flight time of less than 3 hours to most ASEAN capitals such as Singapore, Jakarta, Kuala Lumpur, Manila, as well as Hong Kong and Taiwan, making it an ideal destination for a physical presence in the region. The country is also in a position to connect the Pacific Ocean to mainland Asia, thus can be a focal point in international logistics and distribution networks. On the other hand, from land, it opens up to the strongest ASEAN economies, namely Malaysia, Singapore, and Indonesia.

From a travelling perspective, Hanoi and Ho Chi Minh City can both be reached by a 12-hour flight from major European travel hubs Frankfurt (Germany) and Paris (France). With such a convenient and strategic geographic advantage, Vietnam has historically been an important trading destination and a land of choice by many entrepreneurs and investors to get started in Southeast Asia.

Source: http://www.investinvietnam.vn

2. Advantages of 2018 EU-Vietnam Free Trade Agreement

Invest in Vietnam as European investor

The upcoming EVFTA offers major advantages for European investors seeking business opportunities in Vietnam, and will most likely elevate the EU’s position among Vietnam’s most important FDI partners, as the U.S. decides to withdraw from the Trans-Pacific Partnership. One of the most ambitious and comprehensive agreements which Vietnam has committed to, the FTA includes pledges that expand even beyond WTO commitments, which demonstrates the view of the Vietnamese government on the importance of the relationship with the EU.

The main contents of the EVFTA can be summarized as follows. First, barriers to trade are significantly diminished, with over 99% of tariffs eliminated, 65% of import duties liberalized at entry into force, and the remainder gradually removed in a 10-year period. Second, the Vietnamese government has committed to creating an even playing field for European enterprises by improving Intellectual Property Rights protection, enhance transparency especially in the SOE sector, and establish stronger dispute resolution mechanisms. Third, humanitarian standards, namely environmental protection, human rights protection, and democracy, will be considerably paid attention to, in order to promote sustainable development alongside economic growth.

With streamlined procedures aligned to EU standards and an open and well-regulated investment environment, Vietnam should be expecting large European investments in key sectors: agricultural products and technology, energy, IT, and services.

Source: http://evfta.com

3. Strong Bilateral Trade and Investment Relations

Afbeeldingsresultaat voor EVFTA

The European Union has consistently been Vietnam’s second largest export market of key products such as telephone sets, commodities, agricultural products, and electronics. In addition, in 2015, the EU also become the third largest FDI investor in Vietnam, with a staggering $1.5 billion poured into the country. 25 EU Member States are present in Vietnam, with the Netherlands being the largest investor, having invested nearly $8 billion into more than 250 projects, followed by France and Germany.

These promising figures can first be attributed to the fact that the economies of the two regions are highly complementary. Whereas Vietnam specializes in argo-products and labor-intensive industries, the EU can offer management expertise and advanced technologies to improve manufacturing and technological knowhow. In addition to this, the strong political relation between the EU and the Vietnamese government, combined with the dynamic and proactive business culture of Vietnam, has contributed greatly to the robustness of trade and investment activities between the two regions.

Source: http://evbn.org

4. Access to a Young and Low-Cost Labor Force

vietnam young population

According to the estimations of Nielsen, 60% of the Vietnamese population is under the age of 35, and other reports also show that the median age of Vietnam is approximately 30. Not only is the workforce young, it is also highly skilled, and more importantly, the wage level in Vietnam remains at around half of China’s. With costs in China rising at a high speed, manufacturing is being shifted more and more into Vietnam, a trend that is most well-demonstrated by the remarkable number of Samsung manufacturing projects in the country. Thus, the Southeast Asian country is becoming a highly attractive outsourcing destination for multinational corporations.

5. Impressive Market Size and Growth

vietnam growth

With a population of 93 million and projected to reach 120 million in 2040, Vietnam presents an attractive consumer market for foreign companies. Consumer confidence in 2017 has reached a record high, as the strong growth of the economy brings extra income and increased financial confidence for the growing middle class. As the birth rate in Europe shows sign of stagnation and the population ages, European firms should be in search for new and younger markets, and Vietnam is one of the strongest candidates. Understanding this, the Vietnamese government has increasingly implemented policies to open up the economy and reduce barriers to entry, in an effort to make Vietnam more competitive in the world economy.

In short, as the population continues to grow and the political environment becomes more open and transparent, it is reasonable to anticipate an increasing wave of European FDI into Vietnam for the years to come.

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Afbeeldingsresultaat voor viettonkin consulting

► Learn more about various aspects of investing in Vietnam: https://www.linkedin.com/groups/13547147

► Need help with advice on how to enter the market? Contact Viettonkin JSC at info@viettonkin.com.vn or European Business Development Manager Hieu Nguyen at hieunguyen@viettonkin.vn

 

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