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1. Vietnam export overview
Vietnam has made rapid economic progress since launching its first major economic reforms in 1986. It continues to develop from a low-cost labour economy to a higher value, high-quality enterprise marketplace. Vietnam is forecast to be one of the top 10 fastest growing economies in the next few decades.
Contact a Department for International Trade (DIT) Vietnam export adviser for a free consultation if you’re interested in exporting to Vietnam.
Vietnam is one of the most vibrant economies in Asia with a large market for capital goods and a growing domestic market for consumer goods. It has an ambitious programme of major infrastructure developments including new urban railway networks, a new international hub airport and expansion of regional airports.
Increasing numbers of UK companies are following well established brands like Standard Chartered, HSBC, Karen Millen and Oasis into the market. Rolls Royce motor cars, Mini and Marks and Spencer established a presence in 2014.
Incentives for UK companies exporting to Vietnam include:
- one of Department for International Trade (DIT)’s 20 High Growth Markets
- forecast to be one of the top 10 fastest growing economies in the next decade
- continuing liberalisation of its economy
- member of Association of Southeast Asian Nations (ASEAN) and its free trade area
Strengths of the Vietnamese economy include:
- young population of 90 million
- continuing economic reforms with sectors such as retailing being liberalised to attract foreign investment
- amongst the highest internet penetration in south east Asia with almost 32 million having broadband access
Vietnam is 78th in the World Bank’s Ease of Doing Business ranking.
The main challenges of doing business in Vietnam are:
- inadequate infrastructure
- lack of skills
- grey areas of Vietnamese law
- lack of Intellectual Property Rights (IPR) enforcement
- language barrier means translators and interpreters often needed
Transparency International rated Vietnam 119th in its Corruption Perceptions Index.
You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.
3. Growth potential
3.1 Economic growth
Vietnam’s Gross Domestic Product (GDP) is USD 170.6 billion. Per capita purchasing power is around USD 3,600.
GDP increased 5.98% in 2014. An average of 6% growth a year is forecast from 2015 to 2017.
Retail trade grew 10.6% in 2014, +6.3% in real terms.
3.2 Free Trade Agreements (FTAs)
The ASEAN Economic Community (AEC) was officially launched on 31 December 2015. Overall, the AEC will benefit UK companies operating in the region. The AEC agenda helps promote reform and raise economic growth in the region. Improved trade facilitation, regulatory reform and financial development will benefit all domestic and foreign firms. British firms producing and shipping within the region can benefit from intra-ASEAN tariff reduction.
ASEAN has signed 6 regional FTAs:
- South Korea
- New Zealand
There are also a bilateral FTAs with Japan, South Korea, Chile, and the Eurasian Economic Union.
Negotiations for the Trans-Pacific Partnership and the EU-Vietnam Free Trade agreement were concluded late 2015.
If your company is in a contract with a Vietnamese buyer, goods and services provided by your overseas subsidiary in these countries will benefit from preferential import duties.
4. UK and Vietnam trade
UK exports to Vietnam were £300 million in 2014, an increase of 12% on 2013.
Top 10 UK goods exports:
- medicinal and pharmaceutical products
- power generating machinery
- chemical materials
- professional and scientific equipment
- metal ores
- general industrial machinery
- feed for animals
- fish and crustaceans
- electrical machinery
- specialised machinery
Trade and investment ties are an important element of the UK-Vietnam Strategic Partnership Agreement signed in 2010.
UK Foreign Direct Investment (FDI) into Vietnam is currently USD 2.7 billion. It is expected to meet the USD 3 billion target set under the above agreement. The UK is the largest EU investor in Vietnam’s education sector, and the third largest EU investor in Vietnam.
5. Opportunities for UK businesses in Vietnam
Department for International Trade (DIT) provides free international export sales leads from its worldwide network. Search for export opportunities.
Power consumption in Vietnam has increased more than 5 fold between 2000 and 2012. Estimated growth is forecast to be 12% to 15% in the 2015 to 2030 period. Vietnam forecasts that nuclear power plants will supply 20% to 25% of its power supply by 2050.
Vietnam’s power development plan includes:
- about USD 130 billion investment in the next 20 years
- 65.5% of investment to develop power generation
- building nuclear power plants on 7 sites
- building 183 new power plants by 2025, of which 90 will be coal based plants
There are opportunities for UK companies in all project phases including consultancy and equipment.
Opportunities for UK companies in specialist power areas include:
- education and training
- regulation and safety management
- waste management
- operation management
Oil and gas
Vietnam is south east Asia’s third largest oil producer. Opportunities for UK companies include supply of equipment and services for:
- seismic surveying for oil and gas exploration
- engineering, construction and production facilities
- drilling and production technologies, including drilling rigs (70 to 200 metres)
- oil spill management
- health, safety and environmental waste management
- training and education
Contact DIT.Vietnam@fco.gsi.gov.uk for more information on opportunities in Vietnam’s energy sector.
5.2 Education and training
There are a number of British education institutions doing business in Vietnam. However, there is room for many more due to the size of the market. The UK is amongst the top 5 favourite destinations for overseas study with more than 8,000 Vietnamese students. The number is rising 15% every year.
- a relatively young population
- recognition of the importance of education in the family
- need for better vocational training
The Vietnamese Prime Minister signed decision 404/QĐ-TTg in March 2015 to approve a curriculum project worth USD 37 million. The Ministry of Education and Training plan to launch the curriculum and textbooks in 2018 to 2019 academic year.
The Ministry of Education and Training have spent more than USD 10 million on equipment for a pilot smart school project in the last 2 years. A further USD 89 million will be spent in the next 3 years.
Opportunity areas in Vietnam include:
- curriculum reform
- teacher training
- English language training
- vocational and technical education
- higher education collaboration
- school equipment
Contact DIT.Vietnam@fco.gsi.gov.uk for more information on opportunities in Vietnam’s education sector.
5.3 Healthcare and pharmaceuticals
Vietnam’s health care system is a mixed public-private system. However, the healthcare system has been slow to develop. Around 30,000 Vietnamese people travel abroad annually to seek treatment in foreign hospitals.
The government has offered incentives to healthcare investors including:
- lower corporate income tax rate
- 4 year tax exemption
- land rent reduction/exemption for at least 7 years
Vietnamese pharmaceutical production and supply capacity is weak. It spends more than USD 1 billion every year on imported drugs. UK medicinal and pharmaceutical products accounted for 11% of total imports in 2013 with a value of £33 million, an increase of 21% yoy.
Joint ventures with local companies should be considered as well as direct exports to access opportunities in Vietnam.
Most hospital medical equipment is imported as most domestic health equipment in Vietnam has yet to meet national and international quality standards. Local production accounts for only 5% of the market. Therefore, there is potential for UK medical equipment companies to export to Vietnam.
Contact DIT.Vietnam@fco.gsi.gov.uk for more information on Vietnam’s healthcare and life sciences sector.
5.4 Mass transport
The government will increase investment in transport infrastructure from USD 7 billion to USD 120 billion by 2020. Infrastructure plans include:
- building 2 new international standard airports
- upgrading 7 existing airports
- building 6 metro operations in Hanoi and Ho Chi Minh City
UK companies will have the opportunity to offer:
- design / construction
- project management
Working in partnership with leading contractors from Japan and South Korea is also an option.
There is potential for UK companies to become involved in the operation of the airline industry.
Contact DIT.Vietnam@fco.gsi.gov.uk for more information on mass transport opportunities.
6. Start-up considerations
British companies can approach the Vietnamese market in several ways:
- export directly
- set up an agency
- appoint a distributor
- open a representative office
- open a branch
- form a joint venture
- set up a 100% British owned company
- enter into a business cooperation contract
- enter into a Build-Operate-Transfer (BOT) type contract
You should have a local representative acting as an importer/distributor for direct exports. In some certain cases, pre-registration of exporters/producers is required. Getting information in Vietnam can be difficult so it’s important to develop personal relationships.
You should seek legal advice if you intend to set up a company in Vietnam.
7. Legal considerations
Vietnam has reformed domestic legislation as a result of entering into international free trade agreements. However there are still inconsistencies.
Contact the Department for International Trade (DIT) team in Vietnam to help find tax and legal advisers before entering into agreements.
7.1 Standards and technical regulations
Vietnam has its own sets of standards and technical regulations (including labelling), which are in line with international ones. However, exemption/simplification only applies where there is a mutual agreement with the other country.
You must make sure that you have obtained necessary technical licenses (if any) before exporting. The licensing process could take you some time.
The Information Centre of the Directorate for Standards and Quality (ISMQ) has responsibility for Vietnam’s standards system.
7.2 Intellectual property (IP)
Vietnam has the regulations in place to protect IPR. However, enforcement is not strong. You must take measures to protect your IP before exporting. If faced with infringement you must work with the relevant inspectorates in various ministries.
The National Office of Intellectual Property of Vietnam (NoIP) has responsibility for IPR registration.
Contact the Department for International Trade (DIT) team in Vietnam for help in working with NoIP. You can also request help from the Asean IPR SME Helpdesk.
Read the Intellectual Property Office’s (IPO) guide to IP protection in Vietnam
8. Tax and customs considerations
Vietnam has signed a double taxation agreement with the UK.
Vietnam’s General Department of Taxation has responsibility for tax matters.
8.1 Corporate Income Tax (CIT)
Enterprises are subject to tax rates under the CIT Law. Standard CIT rate is 22% and will be reduced to 20% from 2016. Businesses operating in certain sectors are subject to higher CIT rates.
Tax incentives are granted to businesses investing in some:
- priority sectors
- specific locations
- large projects
8.2 Value Added Tax (VAT)
VAT applies on the duty paid value of imported goods. The importer must pay VAT to customs authorities at the same time they pay import duties. Different rates of VAT are applied to different goods and services. Generally, the rate is up to 10%.
8.3 Other taxes and fees
Special Sales Tax (SST) is applied to the production and import of certain commodities. The commodities include:
- liquor and beer
- most vehicles
- services such as casinos, gambling, lotteries, golf clubs, etc
Other taxes and fees include:
- foreign contractor tax
- natural resources tax
- environment protection tax
Vietnam’s General Department of Customs has responsibility for customs matters and provides information on tariffs..
Import duties are subject to frequent changes. Rates are applied according to different trade agreements. Contact the Department for International Trade (DIT) team in Vietnam to find out the rates applicable to your products and services.
You can find more about import tariffs in the Market Access Database.
Vietnam maintains a price reference database to avoid under-invoicing. This can impact customs valuation. More information on the reference price list can be found in Decision No.1114/QĐ-TCHQ dated 10 April 2014. There is no free English version available. Companies can look up their products by the 4 initial numbers of their Harmonised System (HS) codes
Your local representative can assist with the documentation needed to import your goods into Vietnam.
Vietnam’s General Department of Customs provides a comprehensive list of documents.
Contact the Department for International Trade (DIT) team in Vietnam for information on customs procedures.
8.6 Exchange controls
The State Bank of Vietnam (SBV) imposes strict controls on foreign exchange transactions.
You must get foreign currency convertibility rights from SBV as early as possible. Convertibility rights are normally part of the investment licence so are given to companies operating in specific import substitute and other ‘important’ industries. Convertibility rights don’t guarantee availability of foreign exchange.
Foreign currency is allowed out of Vietnam only when:
- needed for payment for goods and services by an importer with an import license and other supporting import documents (ie purchase contract, invoice, customs declaration form etc)
- remittance of dividends has been cleared by Vietnamese tax authorities
- repaying foreign loans and interest
- paying salaries, bonuses and allowances to expatriate employees
9. Business behaviour
Some cultural differences when doing business in Vietnam include:
- smiles and nods do not mean ‘yes’ to your proposal
- present business cards with both hands
- use correct form of address, eg Mr Nguyen Nam Thuy would be Mr Thuy
10. Entry requirements
Business visas are required. You can find information on getting a visa on from the Vietnamese embassy. A 30 day business visa will generally be issued.
10.1 Travel advice
If you are travelling to Vietnam for business check the Foreign & Commonwealth Office’s (FCO) travel advice beforehand.
Contact the Department for International Trade (DIT) team in Vietnam for more information and advice on opportunities for doing business in Vietnam.