Why is Vietnam an attractive place to invest in?
Dr Kyle Wong, Dr Amanda Lim (with her AI Assistant)
Vietnam has been making headlines in recent years for its rapid economic growth and favorable investment climate. With a young and dynamic population, a thriving economy, and a commitment to integrating with the global economy, Vietnam is quickly becoming one of the most attractive destinations for investors. In this article, we will examine the key factors that make Vietnam such a compelling place to invest in, including its demographic advantage, strong economic growth, integration with the global economy, ease of doing business, and openness to foreign investment.
Reason # 1: Attractive Demographics
Vietnam’s total population reached 97.6 million in 2020, increasing 1.14% compared to 2019’s. Vietnam enjoys what is known as the “golden population structure”, which means for every two people or more working, there is only one dependent person. This demographic bonus provides Vietnam with a unique socio-economic development opportunity to take advantage of the young labour force and push its economic growth.
Reason # 2: High Economic Growth
Despite the global trade recession and China’s economic growth slowing down, which impacted most parts of Southeast Asia, Vietnam proved to be resilient to the turbulence and still scored a growth rate of 7.1% in 2018, highest rate in nearly 10 years. 2020 is a year of great difficulties and challenges for the world economy in general, including Vietnam. The world economy is forecasted to be in the most serious recession in history, the growth of major economies is deeply declined due to the negative influence of the Covid-19 epidemic. However, the Vietnamese economy maintained its growth rate with an estimated GDP growth rate of 2.91%.
Reason # 3: Integration with Global Economy
Vietnam officially became the WTO’s 150th member on 11 January 2007. WTO accession has created both opportunities and challenges for Vietnam to become an attractive investment destination. In addition, Vietnam’s participation in the ASEAN Economic Community (AEC), as well as the Comprehensive and Progressive agreement for TransPacific Partnership (CPTPP) and the conclusion of several free trade agreements (FTAs) such as the EU-Vietnam FTA (EVFTA) and the UK — Vietnam FTA has shown the nation’s efforts to further integrate into the world economy.
Reason # 4: Doing business is getting easier every year
Vietnam has made numerous amendments to their regulations to make investing in Vietnam more transparent. In terms of ease of doing business, Vietnam ranked 82 out of 190 countries in 2016. Compared to the previous year, the ranking improved by 9 positions. This rise was the result of improvements in some processes of doing business. For example, the government made the procedures of getting electricity and paying taxes easier, according to the World Bank report. Based on their economic models, Trading Economics predicts Vietnam to rank 60 by 2020. Hence, the future prospects of ease of doing business in Vietnam are very promising.
Reason # 5: Openness to foreign investment
Geographical advantages and growing economy are not the only attractive features for investors. Vietnam has always been welcoming to foreign direct investment (FDI) and encourages it by constantly renewing regulations and providing FDI incentives.
The government of Vietnam offers several incentives to foreign investors who invest in certain geographical areas or sectors of special interest. For example, in high-tech or healthcare businesses. These tax benefits include:
> Lower corporate income tax rate or exemption from the tax
> Exemption from import duty, e.g on raw materials
> Reduction of or exemption from land rental or land use tax
In conclusion, Vietnam is an exciting and dynamic place to invest, with numerous advantages that make it an attractive destination for companies of all sizes. With its young population, robust economy, favorable business climate, and supportive government policies, Vietnam is poised to continue its upward trajectory, making it a smart choice for investors looking to capitalize on the growth opportunities of the future. Whether you’re looking to start a new business or expand an existing one, Vietnam is a place to keep on your radar, and we highly recommend considering it as a potential investment destination.
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