Introduction of Vietnam

The Socialist Republic of Vietnam is the easternmost nation on the Indochinese Peninsula. With a population of over 100 million with 40% living in urban areas (2024 estimates). Legend has it that Vietnam’s origin lay in the harmonious union of Lac Long Quan, King of the Sea, and Au Co, Princess of the Mountains. In real life, Vietnam’s history is characterized by a nearly continuous struggle for autonomy. Reunified in 1975 but for over two decades since then the country experienced little economic growth because of conservative leadership policies. Since 2001, Vietnamese authorities have committed to economic liberalization and enacted structural reforms needed to modernize the economy and to produce more competitive, export-driven industries. Political stability and encouraging foreign investment policies help Vietnam’s FDI grow steadily.

Situated at the crossroads of global trade routes, Vietnam offers unparalleled access to key markets in Asia, Europe and America. Foreign direct investment into Vietnam rose by 8% year-on-year to USD 14.15 billion in the first eight months of 2024, according to the Ministry of Planning and Investment data. Meanwhile, FDI pledges, serving as an indicator of future FDI disbursements, increased by 7% from a year earlier to USD 20.52 billion. It is expected that foreign direct investment will record USD 40 billion by the end of 2024.

Foreign investors poured funds into 16 out of 21 sectors in the national economic classification system, of which the processing and manufacturing industry took the lead, making up 59.1% of the total and up 16.8% compared to same period last year (2023). The real estate seconds with a total investment of approximately 1.41 billion USD, accounting for 32.7% of the total, followed by wholesale and retail and professional activities, science and technology. It is also worth noting that processing and manufacturing was the sector with the largest number of newly-registered projects (39.2%) and number of capital adjustment (62.3%). The wholesale and retail led in the number of capital contribution and share purchases (43.9%).

China was Vietnam’s biggest trade partner in first half of 2024, with a total trade value of USD 94.8 billion, followed by the U.S. at USD 61.4 billion and the ASEAN bloc at USD 40.8 billion. China was also Vietnam’s largest import market with a 34.7% year-over-year increase (USD 27.8 billion), while the U.S. was its most prominent export destination with 22.1% year-over-year increase (USD 54.3 billion). Other major trade partners of Vietnam included South Korea, the EU, and Japan, with total trade values reaching US$38.4 billion, US$32 billion, and US$21.7 billion, respectively.

Geography

Location: South-eastern Asia, bordering the Gulf of Thailand, Gulf of Tonkin, and South China Sea,
alongside China, Laos, and Cambodia
Area: total: 329,560 sq km
Land: 325,360 sq km
Water: 4,200 sq km
Coastline: 3,444 km (excludes islands)

Climate: Tropical in south; monsoonal in north with hot, rainy season (mid-May to mid-September) and warm, dry season (mid-October to mid-March)
Population: 87,642,000 (2011 est.)(1)
Age structure: 0-14 years: 24.46% (2009 census)
15-64 years: 69.12% (2009 census)
65 years and over: 6.42% (2009 census)
Population growth rate: 1.10% (2011 est.)
Life Expectancy: 71.4 (2008 est.)
Literacy Per cent: 94.99 (2009 census)
Languages: Vietnamese (official), English (increasingly favoured as a second language), some French, Chinese, and Khmer; mountain area languages (Mon-Khmer and Malayo-Polynesian)

Economy

Vietnam's economy has been experiencing consistent growth for several years, making it an attractive destination for foreign investors. Experience the exponential growth driven by a robust manufacturing sector, a booming tech industry, and a rapidly expanding middle class. Vietnam showcased strong performances across multiple indicators in the first half of 2024, prompting the General Statistics Office (GSO) to project a 6-6.5 percent growth rate for the year, aligning with the government’s target.

Vietnam boasts a young and well-educated population, providing a ready pool of talent for foreign businesses. As of the end of June, Vietnam’s workforce aged 15 and above is estimated at 52.5 million people, up 196,600 year-on-year. The service sectors dominated the country’s workforce, employing 40.2%, followed by industry and construction of 33.1%, and agriculture-forestry-fisheries of 26.7%.

The Vietnamese government has implemented a number of policies and reforms to attract foreign investment, creating a more business-friendly environment.

Legal System

Vietnam uses the Civil Law system which based on written laws. The hierarchy of the legal System in Vietnam can be simply classified into three basic layers in term of its governing scope and level: (1) The National Assembly issues the Constitution, laws, codes and resolutions; the National Standing Committee issues ordinances and resolutions; (2) Legal instruments issued the central executive and justice bodies including: decisions and mandates of the State President; decrees and resolutions of the Government, decisions and directives of the Prime Minister; decisions, directives and circulars of Ministers and equivalent levels; resolutions of the Supreme Court’s Judge Council and other legal instruments of the Supreme Procuracy; and (3) resolutions of the People Councils and decisions and directives of the People’s Committees.

All laws and regulations root from the Constitution and then the Civil Code. Other important laws concerning foreign investment and trade include the Law on Investment in Vietnam; the Law on Enterprise; the Law on Commerce; the Labour Code; the Law on Land; Law on Corporate Income Tax; the Law on Value Added Tax; the Law on Competition, etc.

Forex Control

Vietnam imposes a strict control over foreign currency. Foreign investors who wish to transfer capital in foreign currency into Vietnam must open a specialised foreign currency bank account at a legal bank in Vietnam. During the operation, foreign currency remitted into Vietnam by foreign investors must be converted into Vietnamese dong or deposited in a foreign currency bank account. Payment made by enterprises in foreign currency can be implemented in certain cases as described by the State Bank of Vietnam (SBV), such as payment for imported goods and services; abroad remittance by foreign investors of invested and reinvested capital, earning profits from undertaking in Vietnam, principals and interests of off-shore loans and credits, and other legal benefits; payment for travel allowances to employees travelling abroad, payments of salaries and other legal incomes of foreigners; personally carried foreign currency are also allowed(but for a limited amount defined by law for different circumstances and in case of excess, the whole amount will be taxed like forex trading). In all cases above the amount of foreign currency are monitored.

Foreign investors who are in need of foreign currency for paying allowed business transactions can buy foreign currency from permitted banks in Vietnam. Offshore loans reaped by enterprises are subject to certain conditions as regulated by SBV. Medium and long term loans are required to be registered with SBV.