What are startup companies in Vietnam

Setting up a company in Vietnam / assigning a representative

Company formation in Vietnam

Vietnam has been one of the most dynamic economies in Southeast Asia for some time with permanent economic growth rates of around 6 to 7%. With growth of 7.0% in 2019, Vietnam continues to be among the leaders in Southeast Asia. For 2020, a reduced growth rate of between “only” 2.5% to 5% is expected for Vietnam because of the coronavirus pandemic; In principle, however, this does not change the fact that Vietnam remains on a growth path in the medium and long term. Many factors are mainly responsible for the consistently high growth over the years. These include, among other things, high revenues from the export economy, but also increasing domestic demand (wage increases, job creation in the manufacturing industry and in tourism) and robust investments by the public sector.

Vietnam has become an attractive investment destination since joining the World Trade Organization (WTO) in 2007 and has a fixed position in the supply chain of multinational companies in some industries. Reasons for this are, in addition to the low wage costs, the favorable geographical location (proximity to China), a young and willing population, stable political and economic framework conditions and financial incentives for investors. The Vietnamese government's economic policy focus is on economic liberalization and an open, omnidirectional trade policy. Important goals are also to support the export industry and promote the development of local industry and value creation.

For some time now, the country has increasingly benefited from the relocation of production facilities from China and other countries to Vietnam, where generally lower costs and operating risks for foreign companies are expected. In this respect, the corona pandemic has accelerated the trend towards diversification and will further boost Vietnam's attractiveness as an investment location in the medium term.

The integration of Vietnam in a network of regional (ASEAN) and bilateral or multilateral free trade agreements (with China, Hong Kong, Korea, Japan, Australia, New Zealand, Chile and the Eurasian Economic Union) makes the country particularly attractive for multinational investors and helps them to slow down the declining competitiveness of its traditional industries (e.g. shoe production) and ensure continued strong export growth.

In this context, the new EU-Vietnam trade agreement (EVFTA) and investment protection agreement (EVIPA) are particularly relevant for European investors. After ratification by the Vietnamese National Assembly, the EVFTA is expected to come into force in summer 2020. The Investment Protection Agreement (EVIPA) has to be ratified by the EU member states and will come into force at a later date.

So far, more than 40 Austrian companies have established around 50 locations in Vietnam, both in the form of sales companies and representative offices as well as production facilities (mostly for export). The Austrian branches employ a total of around 3,700 people in Vietnam. Your total investment is difficult to estimate. The value of EUR 170 million collected by the Vietnamese side only takes part into account, since many investments are formally made via Singapore or other third countries.

In the past, investments were limited to only a few regions of the country, which, however, led to underdevelopment in large parts of the country. In addition to the regions around Ho Chi Minh City and Hanoi, other provinces, for example in Northeast Vietnam, Central Vietnam and especially in the south of the country, are now increasingly attractive. Hundreds of industrial and economic zones have been established across the country, the advantages of which are mostly good infrastructure, the legal security of land titles and the reliability of tax breaks.

The conditions for starting a business and investing in Vietnam are regulated by the Enterprise Law (LOE) and the Investment Law (LOI). While the company law generally regulates the activities of companies in Vietnam, the investment law defines the general framework for foreign investment projects in Vietnam. Foreign investors are allowed to do all business activities in Vietnam that are not expressly prohibited or restricted / conditional by law. In most cases, foreign entrepreneurs and investors enter the market by founding (or acquiring shares in) a “Limited Liability Company” or “Shareholding Company”. As a rule, foreign investors aim to found a 100% subsidiary, as far as legally and actually possible. Representative offices of foreign investors, on the other hand, have clearly lost their practical importance in recent years.

You can obtain detailed information and advisory services on business start-ups, investments and taxes from the Ho Chi Minh City Foreign Trade Center: Just send an email or give us a call. Upon request, we will be happy to send you our specialist report on company formation and taxes (2nd edition, May 2020).

We support you in founding and investing

Our foreign trade centers will advise you on founding and investing in your target market so that your investment abroad does not go into the deep end. There is also entry fee for the brave: The go-international funding program makes it easier for you to enter the market, develop the market and set up a branch abroad and is part of the internationalization offensive of the Federal Ministry for Digitization and Business Location and the Austrian Chamber of Commerce.

Investment advice

Vietnam is considered the favorite of European investors, and there are actually many reasons for a company location in Vietnam: the favorable production conditions, diversification in Asia, the cost situation, available raw materials, workforce and a digital community on site, the processing of the local market, sourcing activities and right away. But where exactly will the new location be built? Not only do North, South and Central Vietnam differ significantly and each offer different advantages, but the many industrial zones and business parks have different incentive systems. From Austria it is difficult if not impossible to get an overview of the location possibilities and to estimate investment or operating costs as well as the logistics situation. It is also important to know the right form of investment, legal framework and market conditions in advance. We start everywhere.

In order to know the background for your investment decision, we clarify with you in advance which goals and framework conditions you expect from your investment and recommend the appropriate form of investment on site. On the basis of a questionnaire that you define, we collect market data for you and give you an insight into the advantages of different investment locations in Vietnam. We analyze cost structures and incentive systems for you depending on the industrial zone or business park and inform you about the availability of skilled workers, the supplier and customer landscape or export conditions - depending on what it is about.

We also help you with the specific location search and identify potential locations, office space or factory buildings on the basis of location, equipment criteria and operating costs. We evaluate and compare these for you in order to make it easier for you to decide on a specific property, plot of land or acquisition target.

Then at the latest it will be time to take the step to Vietnam yourself. We accompany you to the site visits, arrange property inspections and appointments with the responsible authorities or industrial park operators and let you share in the experiences of already invested Austrian or foreign companies.

So that nothing goes wrong with the legal design of your investment project and the founding steps run smoothly, we can refer you to professional lawyers who specialize in company formation and who know the needs of Austrian companies in Vietnam.

Are you ready? To formulate a tailor-made service package for investment advice and location analysis, simply contact the Ho Chi Minh City Foreign Trade Center.

Grants

If you want to settle in a foreign market, you first have to dig into the cash register - even good service and advice do not change that. Marketing, legal advice, partner search: everything costs before it brings anything. Even with good preparation, there is no guarantee of success when entering new investment territory.

The direct funding from the go-international internationalization campaign