Ho Chi Minh City, the financial capital of Vietnam, has gained global recognition as an investment hotspot, and for good reasons. Foreign investors find this economy resilient, throughout its perseverance against COVID-19 and a rather impressionable consumer base. However, the road to success in Vietnam’s general market is not straightforward. Setting up a business in Ho Chi Minh City gets highly cumbersome if done sans a market entry strategy. Here is the foundation for that strategy.
This article will discuss the various aspects of company incorporation in Ho Chi Minh City (Saigon) to assist the readers and prospective investors in sketching up a market entry strategy. Ho Chi Minh City alone brings in the highest amount of FDI compared to the rest of the country, on average and thanks to its cosmopolitan nature is usually chosen place to set up shop in the country.
Be prepared - Market Research
The stepping stone to a successful market entry strategy for the Vietnamese market is preparedness. The ultimate way to be prepared is by thoroughly conducting market research.
Market research is the process of obtaining, evaluating, and interpreting data to support businesses in making informed decisions. It can help in assessing the targeted market’s needs for products or services, and aids in determining marketing strategies.
Ho Chi Minh City’s consumer market is like non you or your business has probably experienced before, from unique consumer habits, internet usage, and more. Indeed Vietnamese consumers move at speeds not seen in other countries skipping massive stages of development seen in other markets.
Finding out what drives these consumer trends will be elemental to your success. For a list of top market research firms with experience in Vietnam’s unique market click here.
Choose an Entity - Incorporation Options
Foreign investors can leverage one of the following business incorporation options as per their requirements:
• Limited Liability Company
prevalent legal entity type in Vietnam is a limited liability company (LLC), which is ideal for small and medium-sized businesses (SMEs). Single investors can benefit from the company's straightforward corporate form, which only requires one founder. Multi-member LLCs can choose from two to fifty members.
• Representative Office
For foreigners that wish to analyze and investigate the local market, a representative office in Vietnam is ideal. It also lets the parent firm establish a market presence before completely expanding into the country.
• Branch Office
A branch office is a subsidiary of the main corporation. Without forming a distinct legal corporation, one can conduct all of their parent company's commercial activities and generate a profit from their branch office in Vietnam.
• Joint-stock Company
In Vietnam, a Joint-stock Company is suggested for medium and large firms as its corporate form necessitates the presence of at least three founders. Its registration procedure has more stringent standards.
It should be emphasised that most enterprises entering the market now have no specified minimum capital requirements. The charter capital, however, must be paid in full ninety days after getting the firm registration certificate, according to the Enterprise Law. Find out more about incorporation option in Vietnam here.
Know the Benefits - Government Incentives
To maintain the inflow of FDI into the country, Vietnam’s government shows proactive approaches through various incentives on investments. The country has one of competitive tax systems in Southeast Asia, providing the following tax incentives to businesses and organisations:
Corporate Income Tax (CIT) Incentive
New investment projects will be offered preferential tax rates and tax incentives based on their location, industry, and size.
Import Duty Exemption For Fixed Assets
Import duty exemptions are available for projects that are part of the Vietnamese government's encouraged industries and are situated in favorable locations and commodities imported under certain circumstances.
Exemption of Land Rental Fee
A variety of investment projects are eligible for a land rental charge exemption provided certain requirements are satisfied, such as investing in stimulating industries or business areas and/or promoting geographic regions.
Investment Opportunities to Look Out For in 2022: Fintech Sector
Vietnam's fintech sector is particularly enticing for various reasons. With over 80% of the adult population owning a mobile phone, the country has one of the greatest mobile phone penetration rates in the area, yet a low number of bank branches per capita. Fintech has received regulatory backing, with many businesses receiving e-wallet permits. Startups trying to supply financial services through smartphones have found fertile ground as a result of this mix. Indeed according to Asia Nikkei, Vietnam has recently emerged as South East Asia’s most promising fintech market.
Furthermore, the COVID-19 pandemic has removed a fundamental impediment to fintech growth. It has been difficult to persuade retailers to accept mobile wallets since owners are wary about having to pay a charge to mobile wallet providers rather than take cash. However, due to Vietnam's Covid-19 specific regulations, they have turned to online mediums to reach out to customers.
Hiring techniques to be aware of
Another phase in the market strategy for investing in Vietnam is to hire personnel. Be aware of the fact that Vietnam has a higher than average turnover rate, at 24%, well above the world average. To aid businesses in better understanding hiring and recruiting, the following strategies have been developed:
a. Hiring Talent:
When it comes to conducting a business in Vietnam, having the proper personnel on board is critical to ensuring smooth operations and maintenance. To attract the best candidates, a firm must provide competitive pay, better incentives, and top-notch employee benefits.
b. Professional Employer Organization (PEO):
By minimizing your overhead costs, partnering with a PEO can help you save money. PEOs can manage all of your talent recruitment, human resources, payroll, and administrative tasks.
c. Background Check on Employees:
Employers must do background checks on their employees in order to remain on top of regulatory compliance, reduce fraud, and get a better knowledge of an employee's previous work history.
Relaxed Visa Rules - Loosening of Restrictions in 2022
Due to the onset of the pandemic Vietnam had completely closed its borders in early 2020, but with a rapid vaccination drive over the last summer they have been slowly rolling back entry restrictions. The Vietnamese government has authorised a trial plan to welcome overseas tourists, which was suggested by the Ministry of Culture, Sports, and Tourism earlier this year.
According to VnExpress Vietnam plans to open in phases wherein the first phase will let foreigners visit the island of Phu Quoc and other provinces; the second phase, which is expected to roll out sometime in 2022, will allow visitors to target other destinations after seven days of stay; the final decision to completely reopen to tourists does not yet have a firm timeline in place.
Setting up your Business – Plan for your workspace
Vietnam is on track to be fully industrialised by 2045, which is impressive, to say the least. However, with the incredible speed of economic growth, the country needs infrastructure, consumer trends, and bureaucracy to keep pace. One thing is for sure, companies need to study the business environment, research, and lay the groundwork when entering the market. They can leverage the expertise of market access and company setup specialists such as Cekindo and enlist the services of flexible office space providers like Compass Offices to get their business off the ground.
Compass Offices is located at Bitexco Financial Tower in District 1 and the Vincom Landmark 81 in Binh Thanh, 2 iconic buildings prime for corporates and professionals to establish their business presence with a location advantage. Choose the right office location in Ho Chi Minh City, begin at full speed with Compass Offices’ business-ready serviced offices and virtual offices.