Why Invest in Vietnam? 7 compelling reasons to enter the Southeast Asian country
Investing in Vietnam has potential to yield numerous economic advantages in the future. Consequently, domestic and international investors have shown keen interest in this rapidly developing market. Nonetheless, it is essential for them to understand how to leverage this market effectively and make well-informed decisions. Here are 7 reasons why invest in Vietnam and 3 prospective sectors worth considering for investors.
Top 7 reasons to invest in Vietnam
Vietnam has recently gained a reputation as a rising market in Southeast Asia, making it a hot commodity for investors. If your business needs some convincing, here are seven answers to the question of why invest in Vietnam.
Vietnam’s geographical location in Southeast Asia is one of its most significant advantages for businesses and investors. Situated in the eastern part of the Indochinese Peninsula, Vietnam shares its Northern borders with China, Northwestern with Laos, and Southwestern with Cambodia. Additionally, its eastern coastline extends along the South China Sea.
The country’s strategic location offers businesses and investors significant advantages:
- Gateway to ASEAN: Vietnam’s ASEAN membership grants access to a market of over 420 million consumers. This makes it an enticing destination for businesses looking to tap into the growing middle class and expand consumer markets within the region.
- Proximity to China: Vietnam shares a border with China, the world’s second-largest economy. This proximity creates opportunities for bilateral trade, investment, and access to China’s extensive supply chains and manufacturing networks.
- Key Maritime Access: With a broad coastline and proximity to crucial shipping lanes in the South China Sea, Vietnam serves as a pivotal regional trade and logistics hub. Furthermore, recent renovations of ports and airports have facilitated seamless transportation.
Vietnam boasts two prominent cities: Hanoi, the capital in the northern region, offering highly accessible trade prospects. Meanwhile Ho Chi Minh City, the most populous Southern metropolis, serves as the industrial epicenter of the country.
Despite a global trade recession and China’s economic decline affecting much of Southeast Asia, Vietnam has demonstrated remarkable resilience. In 2018, it achieved an impressive growth rate of 7.1%, the highest in nearly a decade.
Fast forward to 2020, a year marked by detrimental global economic challenges, including the unprecedented impact of the COVID-19 pandemic, Vietnam continued to thrive. Despite the adversities, the economy managed to maintain growth, with an estimated GDP growth rate of 2.91%.
With a population of up to 100 million by April 2023, Vietnam has one of the fastest economic development rates in the world. According to the General Statistics Office, the country’s GDP reached USD 409 billion in 2022, marking an impressive 8.02% year-on-year increase. The government has set ambitious targets for 2023, aiming for a GDP growth rate from 5.8% to 6.2%.
This economic expansion has rendered Vietnam an appealing investment destination for many. The surging consumer demand within the country has created promising opportunities for investors to explore and consider. For example, consumption, tourism, and information technology are sectors with major investment potential.
Low investment costs
Investing in Vietnam offers significantly better ROI compared to other countries in the region and globally. This is primarily due to lower investment costs, including labor expenses, land rent, and operating costs.
Additionally, Vietnam possesses abundant natural resources, such as coal, minerals, oil, and various agricultural products like rice, pepper, and coffee. This abundance enables cost-effective industrial production as raw materials and fuel are available domestically, reducing the reliance on costly imports.
According to the Total Workforce Index report in 2022, Vietnam boasted an average labor cost of approximately USD 275 per month, which is notably competitive compared to other international markets. Choosing Vietnam as an investment destination presents an opportunity to optimize both initial investment capital and ongoing costs.
Integration to global economy
Vietnam’s entry into the World Trade Organization (WTO) as its 150th member in January 2007 marked a pivotal moment. This accession brought about a dynamic mix of opportunities and challenges, propelling Vietnam’s journey to becoming an enticing investment hub.
Vietnam engages in initiatives like the ASEAN Economic Community (AEC) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Simultaneously, successful negotiation of free-trade agreements (FTAs) such as the EU-Vietnam FTA (EVFTA) and the UK-Vietnam FTA reflects the nation’s steadfast commitment to deepening its integration into the global economy.
Ease of doing business
Vietnam’s economic standing is on a positive trajectory. Notably, it climbed five places to 7th out of 78 countries for starting a business in 2021, as per the US News and World Report. This improvement reflects Vietnam’s resilience during the pandemic and its rapid ongoing development.
Vietnam remains a magnet for foreign direct investment (FDI),, surpassing 2% GDP growth in 2021 and targeting an ambitious 6.5% for 2022.
The nation boasts a relatively stable government that actively enhances business policies and labor laws. This positions itself as a top destination for FDI within the ASEAN region.
Meanwhile, infrastructure investment remains a priority, with a willingness to explore opportunities beyond ASEAN borders. Furthermore, the government’s investments in industrial zones are expected to increase as foreign capital influx continues to rise.
Large, young labor force
Vietnam boasts one of ASEAN’s largest labor markets, with nearly 60 million workers and a 76 percent labor participation rate. Specifically, approximately 35 percent of this workforce belongs to Generation Y (born 1976-1995).
In recent years, the youthful workforce, with 95% literacy rate and 88% secondary school enrollment rate, began their takeover. Notably, 5% are proficient in English and over 10% are highly skilled. In terms of sectors, 42% work in agriculture, 35% in services, and 23% in industry.
Vietnam’s appeal as an investment destination also lies in its comparatively low minimum wages, ranging from US$140 to US$202 depending on the region.
Growing consumer spending
Vietnam’s economy is on the rise, accompanied by a growing middle class and a population exceeding 95 million. These factors have led to substantial earnings from retail sales and consumer services. As a result, the disposable income of both urban and rural residents is on the upswing, creating a favorable outlook for consumer-related industries.
Numerous sectors in Vietnam have also grown as a result of rising consumer spending. Vietnamese people’s demands are evolving, as shown by greater standards in a number of areas, including education, health, and recreation.
The digital business environment in Vietnam is swiftly changing and will continue to influence consumer behavior. Projections indicate that by 2025, the domestic digital economy will reach US$52 billion. Within this digital economy, sectors like e-commerce, digital banking, and online gaming are emerging with high-potential for investments.
Potential investment opportunities in Vietnam
The following business sectors in Vietnam are drawing a lot of attention from foreign investors.
This sector in Vietnam is experiencing rapid growth. In 2022, there were over 176 fintech companies in the country, a 13% increase from the previous year, according to the State Bank of Vietnam and the Vietnam Fintech Market Report 2022.
Additionally, Vietnam’s online economy was valued at USD 21 billion in 2021, ranking 14th in Asia and 70th globally. This surge in fintech enterprises indicates a continued ascend to a prominent player in the country’s economy.
Vietnam’s tourism industry benefits from its advantageous location, diverse cultures and landscapes, affordability, improved hospitality, and infrastructure. Presently, it holds significant potential for growth.
In the first three months of 2023, international tourist arrivals surged to 2.7 million, a remarkable increase from the same period of last year. Domestic tourism is also thriving, with 27.5 million tourists, surpassing the annual target by over 30%.
Vietnam’s retail sector is ripe with opportunities and potential, driven by its expanding economy, sizable population, and rising incomes. Companies in this industry enhance their corporate brands to impress customers and instill greater trust in Vietnamese products. As a result, the retail sector is a promising investment area in Vietnam.
With a large, youthful population, there is immense potential for e-commerce ventures. Key areas for investment in Vietnam’s e-commerce sector include online marketplaces like Tiki, Shopee, and Lazada, offering expansive reach.
Payment systems such as Momo and ZaloPay are essential for attracting Vietnamese customers. Moreover, logistics and delivery services, led by companies like Giao Hang Nhanh and Viettel Post, offer promising investment opportunities, given the industry’s reliance on efficient distribution networks.
There are multiple reasons why invest in Vietnam. With a rapidly growing economy, a young and dynamic population, and a government proactively fostering business growth, there is no better time than now to invest in Vietnam. So, seize the moment and unlock the limitless potential that this remarkable country has to offer.
If you are eager to gain further insights into the Vietnamese market, be on the lookout for additional articles on our website. On Digitals, a digital marketing agency based in Vietnam, provides a wide range of services to help your brand’s visibility. Reach out to On Digitals today to discover more about our offerings, including social media, website design, and creative design services tailored for your upcoming campaigns.