Vietnam, a country in the South East Asia (ASEAN) with the total area of 331,698 km2 (128,069 sq miles) is one of the most interesting and attractive countries in the region. With such a stable political condition, Vietnam is regarded as the most prospective territories for FDI to Vietnam due to abundant and low labor costs, industrious employees and few natural disaster effects.
With the connecting borders to Laos, China, Cambodia through good transportation systems of National Highways, Vietnam is marked as the best country for goods delivery and border crossing business among other countries in the same region.
In 2017, Gross domestic product (GDP) rose to 6.81%. Vietnam is one of the fastest growing ASEAN economies. Manufacturing and processing sector attracted over 40% of total FDI in 2017.
Total population by end of 2017 was estimated at over 94 million people. Vietnam with young labor force is an attractive destination of many investors. Vietnam provides an abundant and fast-growing source of low-wage labor.
Vietnam has signed 10 free trade agreements including the ASEAN Free Trade Area (AFTA) and the five FTAs between ASEAN and China, Japan, South Korea, India, Australia, and New Zealand, as well as four bilateral FTAs with Chile, Japan, South Korea and the Eurasia Economic Union (EAEU).
B. Investment Incentives
Corporate Income Tax (“CIT”)
A foreign investor setting up a new company or a new investment project in Vietnam will be granted Corporate Income Tax (“CIT”) incentives. These incentives are applied for the business set up in the locations and/or sectors or size of the project which are encouraged for investment in accordance with development policies of the Vietnam Government.
Under corporate income tax (“CIT”) law which was passed by the National Assembly on June 19, 2013 and came into effect since January 1, 2014, and Law 78/2014/TT-BTC, the standard CIT rate is 20%, effective on January 1, 2016.
Circular 96/2015/TT-BTC dated 22 June 2015 guiding on the changes in Decree 12/2015.
CIT is applied from arising taxable income, but not more than 3 years from the Issuance of ERC
(Applied for BWID Bac Ninh 1&2, BWID Hai Duong, BWID My Phuoc, BWID Bau Bang, BWID VSIP2 and BWID Nhon Trach)
(Applied for BWID Hai Phong)
C. Minimum Wage
- Vietnam along with several ASEAN countries will see a rise in their minimum wages to support the rising costs of living.
- Minimum wage is used for employees in all non-state enterprises and is based on regions as defined by the government.
- Minimum wage is regulated and revised annually by the National Wage Council and applied from the 1st January of year.
D. Infrastructure - Specific Incentives
1. Vietnam Infrastructure – Seaports
With wide territorial water, a long coastline with many sloping lochs and deep bays, near major urban centers and production areas with high import-export demands, Vietnam gets huge advantages for seaport development. 40% of trade volume from the Indian Ocean to the Pacific Ocean through the South China Sea and then to China, Korea, Japan, Korea, and the United States.
According to Vietnam Seaport Catalogue published by Vietnam Ministry of Transportation in 2015, as of the current time, Vietnam has a total number of approximately 234 seaports stretching along the coast of the country. In general, seaports in Vietnam located concentratively in three main clusters:
- North Vietnam:
This northern cluster includes seaports in Quang Ninh. Hai Phong Seaport is the biggest seaport in the north of Vietnam.
- Central Vietnam:
This is the cluster with the lowest concentration rate. Seaports in central Vietnam spreads along the area, located in Nghe An, Ha Tinh, Quang Binh, Thu Thien-Hue, Da Nang, Quang Ngai, Khanh Hoa, and Binh Dinh. Most of seaports in this cluster are in medium and small scale. The biggest seaport of this region is Da Nang Seaport.
- South Vietnam:
HCMC sub-cluster: This area has a total of 39 seaports. Top 4 biggest seaports are Saigon Seaport, Cat Lai Seaport, Ben Nghe Seaport, and VICT Seaport.
Vung Tau-Thi Vai sub-cluster: Currently, this sub-cluster has five major seaports, including Cat Lai, Dich-Vu-Dau-Khi, Vietsopetro, Go Dau A, and Cai Mep-Thi Vai international seaport.
Mekong Delta sub-cluster: including Can Tho, My Tho, Dong Thap, Hon Chong, etc..
2. Vietnam Infrastructure – Airports
The three biggest airports of Vietnam are Noi Bai, Da Nang, and Tan Son Nhat. Long Thanh International Airport is one of the biggest future infrastructure projects in Vietnam. As planning, Long Thanh Airport will be developed in Long Thanh District, Dong Nai Province, 40 km east of HCMC. The total amount of investment capital for this project is estimated at USD 16,030 USD million. Long Thanh International Airport is in under-planning stage and is expected to start its construction in 2019. The future airport is designed with the capacity of up to 100 million passengers per year and to be the biggest airport in Vietnam. When Long Thanh Airport is completed (2025 as in master plan), it will help to ease the high pressure on current southern airports, especially Tan Son Nhat airport.
3. Vietnam Infrastructure – Roads & Railway System
Vietnam's road transport system has been well developed with national and provincial roads. The longest and most important is National Highway 1A. National Highway 1A has a total length of 2,360 km, going through along the length of Vietnam territory with the starting point in Lang Son Province (North Vietnam) and the ending point in Ca Mau (South Vietnam). National Highway 1A plays a vital role as a “backbone” of Vietnam transportation system in general thanks to such advantages:
- Connect many provinces/cities, connect seven economic centers (except Highland economic area)
- Be able to associate with the other means of transportation, facilitating to maximize the efficiency of the logistic & cargo transportation industry
Along with roads system, Vietnam has also developed a railway system which spreads from the north to the south of the country. Vietnam railway network has a total length of over 2,6700 km, including the longest route North-South railway. North-South Expressway is a highway route that closes to National Highway 1A. The North-South Expressway connects from Hanoi to Can Tho with the total length of 1,811 km. There are five completed parts including HCMC-Trung Luong (40 km), Cau Gie-Ninh Binh (50 km), Lien Khuong-Da Lat (19 km), Ha Noi Ring Road 3 (28 km), and Thang long Avenue (30 km). The other parts are proposed to be constructed in 2019-2020. According to Vietnam Ministry of Transportation, logistics cost makes up approximately 20% of the total GDP. The Expressway is expected to shorten transportation distance and time, and relying on that freight cost is reduced, contributing to reducing the cost of goods production, improving the products’ competitiveness, contributing to improving the investment environment as well as national competitiveness.