A firm foundation for development
After 30 years of innovation, Vietnam has risen to join the group of middle-income developing countries. Despite difficulties caused by the global economic downturn, during 2011-2015, Vietnam managed to achieve growth of 6 percent with year-on-year increase. The economy is expected to expand by 6.5 percent this year, the highest level since 2011. Vietnam’s economy is entering a new cycle characterized by macro-economic stability, higher growth, low inflation, towards sustainable development with GDP growth rate of 6.5 to 7 percent per year in period 2016-2020, annual increase of trade turnover of about 12 to 15 percent, increase of purchase power and market scale, GDP per capita of US$ 2,200 in 2015. To date, total registered FDI capital is about US$ 270 billion with over 19,000 on-going projects of foreign investors from 105 nations and territories, disbursement of US$ 135 billion.
A number of Multinational Corporations came from many countries in the world, including South Korea, are very successful in Vietnam. Trade turnover 2011-2015 increased by an average of about 15 percent per year, reached approximately US $ 330 billion in 2015 and is projected up to US$ 600 billion by 2020 with the equiblity and stability of the trade balance.
Further improving business and investment environment
As for business investment environment, Vietnam is trying to perfect market economy, focus on improving legal framework and administrative procedures, especially in implementation, improving quality of human resources and synchronously developing infrastructure. Many laws and legal documents have been enforced and the others continue to be drafted and will be approved in 2016 with specific incentives. Vietnam strives for improving the criteria of business environment for reaching and exceeding the average of the ASEAN-6 countries by the end of 2015 and improving the index of Vietnamese business environment for reaching at least the average of the ASEAN-4 countries in 2016.
Synchronous and modern infrastructure system is a breakthrough in development strategy of Vietnam. Reform of public investment will facilitate international and domestic private businesses’ participation in the infrastructure development with priority given to high-tech and supporting industry projects. Vietnam is updating and will soon publish a list of PPP projects calling for investment in such fields as transport infrastructure, energy, water supply, waste treatment, urban infrastructure, etc.
Now, Vietnam Government has been focusing on SOEs equitization, since 2011, as much as 350 SOEs have been equitized and this process will be continued to be promoted. After equitization, SOEs operate at the same playing field with other businesses; almost them expand in size and generate profit. Vietnam encourages foreign corporations with financial potential, high technology, available market to take part in Vietnamese SOEs equitization or do M&A in the coming time.
Up to date, Viet Nam attracted the total capital commitment of foreign investors in Vietnam reached about 284.6 billion US dollars of foreign investment from 112 countries and territories in about 20,400 operating projects. of which, the inplemented capital amounts to $ 140 billion. The increase in newly registered and addition capital, as well as high ratio of disbursement mean that foreign investor have seen positive investment prospect in Viet Nam.
According to United Nations Conference on Trade and Development (UNCTAD), Vietnam is ranked at 9th in the world investment attractiveness index. There are over 200 TNCs of the Fortune Global 500 list have investment in Viet Nam (Intel, Samsung, LG, GE, Bosch, BP, Microsoft, Sumutomo, Formosa BP, Airbus, Citibank, Toyota ...), among them, all South Korean enterprises in the list had investment projects or businesses relevant to Vietnam.
Fostering international economic ties
Regarding international economic integration, Vietnam has been reforming strongly, integrating into international economy deeply, concluding negotiation of some important FTAs including Viet Nam – South Korea FTA, joining AEC in late 2015.Vietnam and other member countries have done their utmost to realize ASEAN Economic Community targets in late 2015. Vietnam has signed 8 FTAs and now basically concludes negotiations with 11 partners participating TPP. FTAs have opened up a vast space for free trade between Vietnam and 55 partners, including all members of the G7 and 15 members of the G20. Key trade deals signed in 2015, many of which are expected to favour Vietnam, will set the scene for the country to strengthen bilateral ties with regional and international partners.
(i) The Trans-Pacific Partnership (TPP) trade agreement, brokered in October and due to come into effect in 2017, is seen as holding considerable potential. Analysts, including the World Bank, have suggested that Vietnam could be the greatest beneficiary of the 13-nation deal, which accounts for a combined 40 percent of global GDP.
The TPP could boost Vietnam’s GDP by as much as 8 percent over the next two decades, the bank said in a recent report, while adding 17 percent to its real exports and 12 percent to its capital stock over the same period.
(ii) In early December, 2015 Vietnam announced the signing of free trade agreement with the EU, which will eliminate 99 percent of tariffs on traded goods over a 10-year period. Once ratified, the agreement is expected to come into force in late 2017 or 2018.
(iii) Vietnam is also likely to be a major winner from the ASEAN Economic Community (AEC), which came into force at the end of 2015. ASEAN already stands as Vietnam’s third-largest export market after the US and the EU, and Vietnam is also a major recipient of goods from other bloc members, importing more from its member states collectively than any other market, with the exception of China and South Korea.
The lowering of trade barriers and tariffs within the AEC, together with Vietnam’s rise as an industrial and technological production centre, is expected to support higher levels of intra-bloc trade and investment.
(iv) Vietnam - South Korea Free Trade Agreements (VKFTA) has officially been signed and came into effect in 20 December, 2015. VKFTA is a comprehensive, high-level commitments and ensure a balance of benefits, with the main contents include: trade in goods, trade in services, investment, intellectual property, measures legal food safety and animal and plant quarantine, rules of origin, customs facilitation, trade defence, technical barriers to trade, e-commerce, competition, economic cooperation, institutional and legal.
This Agreement is expected to bring a positive impact on many aspects of Vietnam, especially in economics, trade and investment, helping Vietnam to further improve the business environment, allocation and use the nation’s resources more efficiently, accelerate the process of restructuring the economy towards higher value-added and sustainable development.
Advantages of doing business in Vietnam
There are some factors that make Vietnam an attractive country for foreign investors include (1) Political stability, good – tempered religions and social security; (2) Strategic location in the heart of Southeast Asia, the fastest growing economic region in the world and having favorable geographic conditions; (3) Abundance of human resources with the population of 93 million, of which 50 percent are aged under 30 and competitive labour costs; (4) A rapid and stable economic development with GDP growth rate of 6-7 percent for 2011 – 2015 and its target of at least 6.6 – 7 percent for 2016 -2020. (5) A relatively large-scale economy with GDP of about US$ 220 billion and population of around 93 million is a promising prospect for a growing consumer market; (6) An open business environment: Vietnam has integrated more deeply into the global and regional economies and increase trade and investment ties with nations all over the world. The Vietnamese Government has been putting the best efforts in creating and promoting a competitive business environment to protect consumers, and to ensure a level playing field for both domestic and international business.
