The Pros and Cons of Doing Business in Vietnam

Vietnam is an enticing destination for global business expansion, thanks to its thriving economy and ongoing political reforms. The nation offers unique opportunities for entrepreneurs, boasting top-tier infrastructure with top-notch facilities at the economic hotspots. With this blog post, On Digitals will provide a comprehensive overview of doing business in Vietnam, covering its advantages, disadvantages, and essential business customs in this dynamic marketplace.
Overview of Vietnam’s Economy
Why does doing business in Vietnam become such an appealing initiative? Vietnam’s economic reforms since 1986, combined with global trends, have transformed it from extreme poverty to a middle-income nation in one generation. Vietnam ranks 73rd in the global rankings, one of the top positions within the ASEAN region.
This achievement is primarily attributed to Vietnam’s dedicated efforts in implementing reforms, resulting in a decrease in bureaucratic processes and the overall expenses associated with conducting business.
In the future, Vietnam is anticipated to become the second-largest economy in Southeast Asia by 2036. There is no time better than now to begin your journey into this soon-to-be highly profitable market.

Advantages and opportunities of doing business in Vietnam
Vietnam’s business environment is highly appealing to entrepreneurs due to its simplicity and streamlined regulations for company formation. Additionally, foreign investors are further enticed by government incentives like tax exemptions, startup capital support, and reduced labor costs. As the cherry on top, Vietnam’s strategic geographic location makes it an ideal hub for various business activities.
Low Operation Cost
One of the standout features of doing business in Vietnam is the relatively low cost of operation compared to other countries. This cost-effectiveness encompasses various aspects of business operations, making it an attractive proposition for entrepreneurs and investors.
The cost of living in Vietnam is also considerably more affordable than in many other nations. Moreover, conducting business in Vietnam provides enterprises with the chance to benefit from a substantial and cost-effective labor pool.
The Growing Vietnamese Economy
The most prominent reason to consider Vietnam for future business ventures is its rapidly developing economy. Over the past few decades, Vietnam has transitioned from an agrarian economy to an industrial and services-driven one. With a consistent GDP growth rate, it offers a stable market for both domestic and foreign businesses.
Abundant Skilled Workforce but Affordable Labor
The vast talent pool in the country is also an appeal of doing business in Vietnam. It boasts a young and dynamic workforce with a large population of over 96 million, including a substantial number of well-educated and skilled professionals.

With a literate working-age population of 97%, a substantial tech talent pool of 400,000 engineers, and an annual production of 50,000 IT graduates, Vietnam offers a competitive labor market.
For example, building an offshore IT team in Vietnam is notably more cost-efficient, with savings ranging from 15% to 50% compared to Thailand or Malaysia. Vietnamese developers are renowned for their professionalism, strong technical abilities, and effective English communication skills.
Expanding Middle Class
Vietnam’s socio-economic landscape has witnessed a significant transformation, and one of the most prominent indicators is the rapid growth of its middle class. This expansion holds immense promise and opportunity for businesses operating within the country.
The expanding middle class presents a compelling market for businesses seeking growth opportunities. With increasing purchasing power and changing consumption patterns, this demographic is a driving force behind the country’s economic development. Entrepreneurs that adapt to the evolving preferences of the middle class stand to benefit significantly in this dynamic market.
Government Support
The Vietnamese government offers various incentives to attract foreign investments. These policies are designed to stimulate economic growth, enhance competitiveness, and foster a healthy business environment.
Key aspects of investment incentives include tax breaks, import/export privileges, and preferential treatment for specific industries. These incentives can significantly reduce the cost of doing business in Vietnam.

Export Opportunities
Vietnam’s strategic location, trade agreements, and evolving economy allows businesses to capitalize on promising export opportunities. The country’s participation in international trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union-Vietnam Free Trade Agreement (EVFTA), can facilitate the exporting process for businesses.
Vietnam’s geographical location in Southeast Asia places it at the crossroads of key trade routes. Additionally, the country serves as a gateway to reach neighboring markets such as China, Thailand, and Cambodia.
Disadvantages and Risks of Doing business in Vietnam
Vietnam’s burgeoning economy and numerous opportunities come with their fair share of disadvantages and risks for businesses. It is essential to be aware of these challenges to make informed decisions while doing business in Vietnam. Here are some of the key disadvantages and risks:
Regulatory Complexity
Complex Legal Framework: Vietnam’s regulatory environment can be intricate, with frequent changes and variations across sectors. Navigating these regulations can be time-consuming and challenging.
Bureaucracy: Administrative processes can be bothersome due to bureaucratic procedures, potentially leading to delays in approvals and permits.
Cultural and Language Barriers
Communication: Language barriers can pose challenges in effective communication with local partners, employees, and authorities, especially in rural areas where English proficiency may be limited.

Cultural Nuances: Understanding and respecting Vietnamese culture is crucial for building strong relationships and conducting business successfully. Failure to do so can lead to misunderstandings or strained partnerships.
Intellectual Property Rights (IPR) Protection
IPR Infringement: Protecting intellectual property rights can be challenging, with reports of trademark and copyright infringements. Businesses must take proactive measures to safeguard their innovations.
High Costs
Despite the cost advantages that Vietnam can offer, in certain aspects, costs can be relatively high, especially in urban areas. Expenses related to real estate, labor, and specific utilities may surpass initial expectations, potentially affecting the overall cost structure for businesses.
Corruption and Transparency
Corruption: Corruption remains an issue in some sectors, potentially affecting business activities and decision-making processes.
Transparency: Transparency in government and business operations can vary, and businesses may encounter challenges in accessing information and comprehending the market.
Foreign ownership regulations
The Vietnamese government imposes stringent regulations regarding the eligibility of 100% foreign-owned businesses. If a business activity does not fall within the categories permitted for full foreign ownership, a joint partnership with a Vietnamese entity is required.
Additionally, in cases where there are no existing World Trade Organization (WTO) agreements or local laws governing foreign ownership for a particular line of business, enterprises will have to apply for approval from authorities.
Final thoughts
Doing business in Vietnam presents a world of opportunities amid a vibrant and evolving market. With its strategic location, trade agreements, and burgeoning customer demographics, Vietnam offers an attractive landscape for both domestic and foreign investors.
To thrive in the Vietnamese market, businesses must embrace adaptability, market research, and strategic planning. By doing so, they can harness the advantages, mitigate the risks, and seize the abundant opportunities that Vietnam has to offer. With the right approach and dedication, success in doing business in Vietnam is indeed within reach.
Count on On Digitals as your ultimate companion in your quest to discover the Vietnamese market. With a proven history of fruitful partnerships, both locally and globally, we excel in tailoring personalized marketing strategies that align with your business goals. Contact us today to delve deeper into our offerings encompassing SEO, social media, and KOL marketing solutions.