Against the backdrop of deepening globalization, Vietnam has become one of the most attractive investment destinations in Asia. Its rapidly growing economy, abundant labor resources, and increasingly improved infrastructure have attracted the attention of a large number of foreign-invested enterprises. However, as market access thresholds increase and industry supervision becomes increasingly strict, how to correctly interpret and respond to the access restrictions of different industries in Vietnam has become a key challenge for foreign-funded enterprises to successfully settle in. This article will provide an in-depth analysis of the complexity of market access in Vietnam, from the restrictions and requirements of specific industries to the latest policy guidance. It will provide detailed guidance and practical suggestions for companies that want to go overseas in Vietnam, as well as those that have already set foot on this land, to help you. Enterprises succeed in the Vietnamese market.

Overview of industry entry restrictions

The Vietnamese market has become the focus of global investors’ attention due to its unique economic advantages and stable political environment. However, Vietnam’s foreign investment access policies are complex and changeable, and companies must fully understand relevant regulations and industry restrictions before entering the market. The following is a detailed analysis of Vietnam’s foreign investment policies, main laws and regulations, and foreign investment access classifications to help companies clearly understand and respond to access challenges.

1.Overview of Vietnam’s foreign investment policies

The Vietnamese government’s long-term development goals include promoting the country’s industrialization and modernization process, improving its scientific and technological level, and strengthening the construction of the digital economy. To achieve these goals, the Vietnamese government has adopted active policy guidance in attracting foreign investment, especially in the fields of manufacturing, infrastructure construction, green energy, and information technology.

Industrialization and modernization : Vietnam is committed to introducing advanced technology and management experience through foreign investment to accelerate industrial upgrading. For example, the government encourages foreign investment to enter manufacturing, high-tech industries, and infrastructure projects. These areas are regarded as key driving forces for the country’s economic transformation.

Digital economic development : As global digital transformation accelerates, the Vietnamese government is also promoting the development of the domestic digital economy. Vietnam has proposed the “National Digital Transformation Plan” with the goal of becoming a digital economic power by 2030. Therefore, foreign-invested enterprises will enjoy more preferential policies in fields such as information technology, e-commerce, and artificial intelligence.

Main laws and regulations : In Vietnam, the market access and operations of foreign-invested enterprises are regulated by multiple laws and regulations. The following are several key laws and regulations that have a direct impact on the entry conditions and restrictions for foreign-invested enterprises:

• “Law on Investment” : The 2020 revised version of the “Investment Law” clarifies the overall framework for foreign-invested enterprises to enter the Vietnamese market. According to this law, investors must comply with a specific industry access list when entering Vietnam, which includes encouraged industries, restricted industries, and prohibited industries.
• “Law on Enterprises” : The 2020 revised version of the “Enterprise Law” stipulates the basic requirements for the establishment and operation of foreign-funded enterprises in Vietnam, including registered capital, corporate governance structure, etc.
• “Law on Foreign Investment Management” : This law stipulates in detail the approval procedures for foreign investment, restrictions on foreign shareholding ratios, and special requirements for foreign-invested enterprises in certain industries.

Classification of foreign investment access in Vietnam : The Vietnamese government has classified and managed the entry of foreign-invested enterprises into different fields based on the importance and sensitivity of the industry. Generally speaking, Vietnam’s foreign investment access is divided into the following three categories:

• Encouraged industries : These industries are usually areas where the Vietnamese government hopes to enhance domestic competitiveness through foreign investment, such as high-tech manufacturing, renewable energy, medical equipment, education, etc. Foreign-funded enterprises in these industries can not only enjoy relatively loose access conditions, but also receive policy support such as tax incentives and land use preferences.
• Restricted industries : In some industries that are sensitive to national security, public interests or resources, the access of foreign-invested enterprises is strictly restricted. For example, industries such as banking, insurance, telecommunications, and publishing usually require foreign-funded enterprises to cooperate with local enterprises or limit foreign shareholding ratios. According to the Investment Law, foreign investments in these industries are subject to strict approval by the Vietnamese government.
• Prohibited industries : These industries usually involve national security, cultural protection or environmental protection, and foreign-invested enterprises are prohibited from entering. For example, industries such as weapons manufacturing, military infrastructure construction, and the mining of certain mineral resources are completely prohibited from foreign investment.

2.Common forms of access for foreign-invested enterprises

In the Vietnamese market, foreign-funded enterprises can invest and operate in various forms. Different access forms are suitable for different industries and corporate strategic goals, and companies need to choose based on their own needs and the requirements of Vietnamese laws and regulations. The following are several common forms of foreign investment access and their related requirements and applicable scenarios.

A wholly-owned subsidiary is a form of wholly foreign-owned enterprise. When a foreign-owned enterprise establishes a wholly-owned subsidiary in Vietnam, it usually has full control over the company’s operations, decision-making and management. This form is suitable for companies that want to have a high degree of autonomy in Vietnam and have strong capital strength. Wholly owned subsidiaries are widely used in manufacturing, technology industries, and export-oriented enterprises. The establishment of a wholly-owned subsidiary needs to meet the relevant requirements of Vietnam’s Investment Law and Enterprise Law. It usually requires higher registered capital and needs to be approved by the Vietnamese government. Although the wholly-owned subsidiary form allows the company to enjoy absolute control, this model also means that the company needs to bear all market risks. Therefore, wholly-owned subsidiaries are suitable for companies with extensive international market experience and in-depth understanding of the Vietnamese market.

A joint venture is a form of enterprise jointly established by a foreign-funded enterprise and a local enterprise. This model is particularly common in the Vietnamese market, especially in industries where the government has restrictions on foreign shareholding ratios. Through joint ventures, foreign-funded enterprises can quickly enter the market and share the resources and networks of local enterprises, reducing operational risks. During the establishment process of a joint venture, the two parties usually conduct detailed negotiations on key issues such as equity distribution, management decisions, and profit distribution. According to Vietnamese laws and regulations, in some restricted industries, the shareholding ratio of foreign-invested enterprises must not exceed a certain limit. For example, in sensitive industries such as banking and telecommunications, foreign shareholding ratio is usually limited to 49%. Although the joint venture model can help foreign-invested enterprises overcome access restrictions, the complexity of management and decision-making, as well as potential conflicts of interest, may affect the long-term development of the enterprise.

Representative offices and branches are common ways for foreign-invested enterprises to carry out light market entry in Vietnam. This form is suitable for companies that wish to conduct market research, establish business contacts or promote products in Vietnam without making large-scale capital investments or bearing excessive legal liabilities. A representative office usually does not have an independent legal person status and cannot directly engage in commercial activities or sign contracts. Its main functions are market research, business promotion and coordination with the headquarters. The procedure for establishing a representative office is relatively simple, but its scope of activities is strictly restricted and it cannot engage in profitable business.

Branches are relatively flexible and can conduct business activities within a certain range in Vietnam, but they still need to accept the management and supervision of the headquarters. The branch form is suitable for enterprises that want to gradually expand their business in Vietnam, especially in the service industry and trade.

3.Priority and restricted areas for foreign investment

In order to achieve national economic development goals, the Vietnamese government has established priority areas of encouragement and strict restrictions for foreign investment in different industries. Understanding these priority and restricted areas can help foreign-funded enterprises better plan investment strategies and avoid entering high-risk industries.

Industries that encourage investment

The Vietnamese government attaches great importance to attracting foreign investment into some industries that are of strategic significance to the country’s economic development. These industries are typically high value-added, technology-intensive, or help drive the country’s industrialization process. Industries that are mainly encouraged to invest include:

High-tech industry : Vietnam is committed to promoting scientific and technological innovation, and investments by foreign-funded enterprises in high-tech fields such as information technology, artificial intelligence, and the Internet of Things receive preferential treatment from the government. Not only will these companies enjoy tax breaks, they may also receive incentives such as land use concessions.

Green energy : As global demand for renewable energy grows, Vietnam is also vigorously developing green energy projects such as wind energy and solar energy. Investments by foreign-funded enterprises in these areas will receive policy support from the Vietnamese government, including simplifying approval procedures and providing financial subsidies.

Infrastructure construction : Vietnam’s urbanization process is accelerating, and there is a huge demand for infrastructure construction. The government encourages foreign investment to participate in the construction of infrastructure projects such as roads, bridges, ports, and airports. These projects can usually obtain long-term operating contracts and stable income.

Agriculture and food processing : Vietnam is rich in agricultural resources. The government hopes to introduce advanced technology and management experience through foreign investment to improve agricultural productivity and food processing levels. Investment by foreign-funded enterprises in this field will be supported by government policies.

Restricted and Prohibited Industries

Although the Vietnamese government encourages foreign investment in many key areas, there are also some industries that are severely restricted or completely prohibited from entry due to national security, cultural protection or public interest concerns. The following are some of the major restricted and prohibited industries:

National defense and military-related industries : In industries involving national security, such as weapons manufacturing, military equipment production, defense infrastructure construction, etc., foreign-invested enterprises are strictly prohibited from entering.

Culture and media fields : Foreign-invested enterprises are subject to strict restrictions in fields involving national culture, media and publishing. The government is worried that excessive foreign intervention in the cultural industry may affect the country’s cultural security. Therefore, in the fields of television broadcasting, film production, press and publishing, etc., the shareholding ratio of foreign-funded enterprises is strictly controlled.

Natural resource development : In some important areas of natural resource development, such as mineral mining and forest resource development, the Vietnamese government has set higher entry thresholds for foreign-invested enterprises. When foreign-invested companies enter these fields, they usually need to cooperate with local companies and comply with strict environmental protection standards.

Access restrictions and requirements for different industries

In the Vietnamese market, there are significant differences in entry restrictions and requirements across different industries. When foreign-invested enterprises enter these industries, they must understand the relevant regulations and policies in detail and ensure compliance with the Vietnamese government’s regulations. The following are entry restrictions and requirements for several major industries in Vietnam.

1.Manufacturing

Manufacturing is one of the main areas for foreign-invested enterprises to invest in Vietnam, but in some key industries, the Vietnamese government has set strict access restrictions and requirements for foreign-invested enterprises.

Automobile manufacturing industry : Foreign investment faces restrictions on shareholding ratio in Vietnam’s automobile manufacturing industry, especially when it comes to the production of core components. The Vietnamese government implements a “localization” policy for the automobile industry, requiring a certain proportion of parts to be produced locally. This not only raises the entry threshold for foreign-invested enterprises, but also increases the cost and difficulty for them to set up local supply chains. In addition, foreign-invested automobile companies must also comply with the Vietnamese government’s environmental standards and ensure that the production process meets local sustainable development goals.

Electronics manufacturing industry : Compared with the automobile industry, the electronics manufacturing industry enjoys relatively relaxed policies in Vietnam. In order to attract foreign investment into the electronic manufacturing field, the Vietnamese government has provided a series of preferential policies, such as tax exemptions and land use concessions. However, in order to improve the local technological level, the government requires foreign-funded electronics manufacturing companies to set up R&D centers in Vietnam to promote technology transfer and improve local innovation capabilities. At the same time, while enjoying these preferential policies, foreign-invested enterprises must also meet the Vietnamese government’s strict requirements for product quality and environmental protection.

2.Financial services industry

The financial services industry is one of the industries that is highly regulated by the Vietnamese government, and foreign-funded enterprises face strict access requirements when entering this field.

Banking industry : When foreign banks set up branches or wholly-owned banks in Vietnam, they must meet strict establishment conditions. These conditions include high registered capital requirements, proof of stable funding sources, and good reputation in the international market. In addition, the Vietnamese government usually requires foreign banks to cooperate with local financial institutions to promote the stable development of the local financial market. In some cases, the shareholding ratio of foreign-funded banks is also restricted. For example, in commercial banks, foreign shareholding ratio is usually not allowed to exceed 30%.

Insurance industry : Vietnam’s insurance market is open to foreign-invested enterprises, but foreign-invested enterprises usually need to enter through joint ventures. When foreign-funded insurance companies are established in Vietnam, they must cooperate with local companies, and the foreign shareholding ratio must not exceed a certain limit. In addition, the Vietnamese government also has strict regulations on the business scope of foreign insurance companies, such as restricting their entry into certain sensitive areas, such as health insurance and pension insurance. Nonetheless, when foreign insurance companies enter the Vietnamese market, they can still quickly gain market share by sharing resources with local partners.

3.Retail and e-commerce

With the rapid development of Vietnam’s economy, the retail and e-commerce industries have attracted the attention of a large amount of foreign investment. However, the government has set clear restrictions and requirements for foreign investment in these industries.

Retail industry : When foreign-funded enterprises enter Vietnam’s large-scale retail market, they usually face shareholding ratio restrictions and high investment thresholds. For example, in investments in certain large supermarkets or shopping malls, foreign ownership cannot exceed 49%. In addition, the government also requires foreign-invested enterprises to pass strict market access review before entering the retail market to ensure that their business activities will not cause unfair competition to local small and medium-sized enterprises. Foreign retail companies also need to comply with the Vietnamese government’s local procurement requirements to support the development of the local supply chain.

E-commerce : Vietnam’s e-commerce market has developed rapidly in recent years, but foreign-funded enterprises still face many business license and regulatory requirements when entering this field. Foreign-funded e-commerce companies must obtain an e-commerce business license in Vietnam and comply with data localization requirements, that is, companies must store Vietnamese user data on local servers. In addition, foreign-funded enterprises also need to ensure that the goods and services on their platforms comply with relevant Vietnamese legal regulations, such as consumer protection laws and advertising laws.

4.Medical and Pharmaceutical

The medical and pharmaceutical industries are highly regulated areas by the Vietnamese government, and foreign-funded enterprises need to meet strict access conditions when entering this field.

Manufacturing and sales of medical equipment : The Vietnamese government has set strict regulations on foreign investment in the field of medical equipment. Foreign-invested enterprises must obtain approval from the Ministry of Health before they can engage in the manufacturing and sales of medical equipment in Vietnam. The government requires foreign-invested enterprises to comply with Vietnam’s medical equipment safety standards and ensure that their products undergo strict quality inspections. In addition, foreign-funded enterprises also need to cooperate with local medical institutions to better adapt to the needs of the Vietnamese market.

Pharmaceutical production and sales : The pharmaceutical industry is one of the key areas of supervision by the Vietnamese government. When foreign-funded pharmaceutical companies set up pharmaceutical production plants in Vietnam, they must comply with strict access requirements. These requirements include obtaining a pharmaceutical production license, complying with Vietnamese drug safety standards and ensuring that good manufacturing practices (GMP) are followed during the production process. In addition, foreign pharmaceutical companies need to cooperate with local companies or establish joint ventures to enter the Vietnamese pharmaceutical sales market.

5. Education

The education industry is an important area for foreign investment in Vietnam, especially in international education and vocational training.

International schools : The Vietnamese government encourages foreign investment to enter the education field, especially in international education. Foreign-funded enterprises can set up international schools in Vietnam, but they must meet a series of access conditions, including that the teaching content must comply with Vietnam’s education syllabus, and the tuition standards must be approved by the Ministry of Education. In addition, the government also stipulates that the proportion of Vietnamese students in foreign-funded schools must not exceed a certain proportion to ensure fair distribution of local education resources.

Vocational training : When foreign-invested enterprises enter the vocational education field in Vietnam, they need to obtain permission from the Ministry of Education. The government encourages foreign-funded enterprises to introduce advanced training technologies and management models in the field of vocational education to improve the skill level of the local workforce. At the same time, foreign-invested enterprises can enjoy tax incentives, financial subsidies and other incentives through government policy support.

6.Real estate and construction

The real estate and construction industries are the pillar industries of Vietnam’s economic development. When foreign-funded enterprises enter this field, they face strict land use rights restrictions and project approval requirements.

Real estate development : When foreign-funded enterprises develop real estate projects in Vietnam, they must comply with relevant regulations on land use rights. The Vietnamese government strictly regulates the land use rights of foreign-funded enterprises, requiring foreign-funded enterprises to obtain land through leasing or cooperation, and cannot directly own land ownership. In addition, the development of real estate projects also requires multiple levels of approval, including environmental assessment, planning permission, etc. The government also requires foreign-invested real estate companies to prioritize the use of local construction materials and labor in projects to support the development of the local economy.

Construction industry : When foreign-invested construction companies enter the Vietnamese market, they must meet a series of market access conditions and project approval requirements. These requirements include obtaining building permits and complying with Vietnam’s building standards and safety regulations. In large-scale infrastructure projects, foreign-funded enterprises usually need to cooperate with local enterprises and participate in the government’s public bidding to ensure the transparency and fairness of the project.

The above are the entry restrictions and requirements for different industries in the Vietnamese market. When foreign-invested enterprises enter these industries, they must fully understand and comply with relevant regulations to ensure the smooth progress of investment.

Common access challenges for foreign-invested enterprises

In the Vietnamese market, foreign-invested enterprises not only face entry restrictions, but also need to deal with complex regulations, cultural differences, fierce competition and policy uncertainty. The following are some common challenges and coping strategies for foreign-invested enterprises when entering the Vietnamese market.

1. Regulatory complexity

Vietnam’s investment regulatory system is highly multi-layered. Foreign-invested enterprises not only need to comply with national laws and regulations, such as the Investment Law and the Enterprise Law, but also need to face relevant regulations formulated by provincial and local governments. There may be differences and contradictions between regulations at different levels, which brings considerable challenges to the investment decisions and operations of foreign-funded enterprises. For example, some provinces may offer special tax incentives to foreign-invested enterprises, while other provinces may set additional approval procedures. In addition, Vietnam’s legal environment is relatively dynamic, and regulations are often adjusted or updated. Foreign-invested enterprises must remain sensitive to changes in regulations and adjust their investment strategies in a timely manner through legal counsel or close collaboration with local partners.

When foreign-invested enterprises enter the Vietnamese market, they should carefully study relevant laws and regulations and cooperate with local legal experts and consultants to ensure compliance. Understanding and adapting to the differences in regulations at different levels is the key to successfully entering the Vietnamese market. In view of the complexity of regulations, enterprises can also reduce regulatory risks by establishing compliance teams, regularly training employees, and maintaining communication with government departments.

2.Cultural differences

Cultural differences are one of the challenges that foreign-funded enterprises cannot ignore in the Vietnamese market. Vietnam has a unique business culture and tradition, which may be significantly different from the usual business practices of foreign-invested enterprises.

First of all, Vietnamese business habits have unique characteristics in terms of contract negotiation, time management and communication methods. For example, Vietnam’s business culture focuses on relationship building, and contract negotiations often take a long time to build trust. In addition, Vietnamese business partners may be more flexible about time arrangements, which may be different from the time concept of foreign-funded enterprises. Therefore, when foreign-funded enterprises enter the Vietnamese market, they should respect and adapt to local business habits, flexibly adjust their negotiation strategies and schedules, and ensure the establishment of solid relationships with local partners.

Secondly, language barriers are also an important challenge faced by foreign-funded enterprises in the Vietnamese market. Although Vietnam’s younger generation increasingly masters English, Vietnamese remains the primary language of communication in business settings. Foreign-invested enterprises may encounter language problems when negotiating contracts, marketing, and dealing with government departments. Therefore, foreign-invested enterprises should consider hiring local employees or translators to ensure effective communication. At the same time, showing respect for local culture by learning some basic Vietnamese expressions will also help establish good business relationships.

3. Industry competitive pressure

Local enterprises in the Vietnamese market often have strong competitive advantages, especially in certain traditional industries such as agriculture, retail and manufacturing. Local companies usually have advantages in terms of price, market network and customer relationships, and the competitive pressure faced by foreign-funded companies cannot be ignored.

When foreign-funded enterprises enter the Vietnamese market, they need to carefully evaluate the industry’s competitive environment and look for differentiated market opportunities. For example, in the manufacturing industry, foreign-funded enterprises can stand out from the competition by introducing advanced technology and management experience to improve product quality and production efficiency. In the retail and service industries, foreign-funded enterprises can use their brand influence and global network to provide differentiated products and services to attract local consumers. In addition, establishing cooperative relationships with local enterprises and sharing resources and market information through joint ventures or strategic alliances can also help foreign-funded enterprises gain a foothold in the fiercely competitive market.

4. Policy uncertainty

Vietnam’s policy environment is relatively unstable, and foreign-funded enterprises often face risks brought about by policy changes during market entry and operations. For example, the government may adjust foreign investment access policies, tax preferential policies or environmental protection requirements in a short period of time, and these changes may have a significant impact on the investment decisions and business strategies of foreign-funded enterprises. In addition, the Vietnamese government may also adjust foreign trade policies based on changes in the international economic situation, which may have an impact on the import and export business of foreign-funded enterprises.

In order to cope with policy uncertainty, foreign-funded enterprises should keep an eye on Vietnam’s policy trends and regularly assess the impact of policy changes on their business. At the same time, enterprises can obtain policy information in a timely manner and make plans for policy changes by participating in industry associations or establishing communication channels with government departments. In addition, foreign-funded enterprises should conduct detailed due diligence before investing, understand policy risks, and include clauses in the contract to deal with policy changes to reduce potential losses.

Therefore, when foreign-invested enterprises enter the Vietnamese market, they need to fully understand the complexity of regulations, cope with cultural differences, look for opportunities in market competition, and be prepared to deal with policy uncertainty. Only by fully understanding and responding to these challenges can foreign-invested enterprises gain a foothold and succeed in the Vietnamese market.

Admission procedures and timetables for different industries

In the Vietnamese market, when foreign-invested enterprises enter different industries, they need to follow different entry procedures and timetables. Understanding these procedures and corresponding timelines can help foreign-invested enterprises better plan their investments and operations.

1.Access procedures for manufacturing industry

Manufacturing is one of Vietnam’s key areas for attracting foreign investment, but entering the manufacturing industry requires a series of strict approval procedures. These procedures mainly include the following key steps:

First, foreign-invested enterprises need to apply for an investment license. According to the Investment Law, foreign-invested enterprises must obtain an investment license before setting up a manufacturing enterprise in Vietnam. When applying for an investment license, companies need to submit detailed investment plans, funding sources, technical solutions and other information. This process usually takes between one month and three months, depending on the size and complexity of the project being applied for.

Secondly, foreign-invested enterprises must conduct an environmental impact assessment (EIA) before setting up a manufacturing plant. According to Vietnam’s environmental protection laws, any manufacturing project that may have an impact on the environment needs to pass an environmental impact assessment. The EIA evaluation and approval process is complex and can take three to six months. During this period, companies need to provide detailed environmental protection plans and accept on-site inspections by relevant departments.

In addition, manufacturing companies also need to apply for land use right certificates, construction permits and other procedures. The approval time for these permits varies by region and usually takes one to two months. If an enterprise plans to set up a factory in an industrial park, the approval process may be relatively simplified, but if it plans to set up a factory in a non-industrial park, it may face more land use restrictions and approval requirements.

Overall, the entire admission process for foreign-funded enterprises to set up manufacturing companies in Vietnam usually takes 6 months to 1 year. During this period, companies need to communicate with multiple government departments and ensure the accuracy and completeness of all documents and application materials to expedite the approval process.

2.Entry process of service industry

Compared with the manufacturing industry, the access process for the service industry is relatively flexible, but there are also large differences in the access requirements and procedures for different service industries. Here is a brief overview of the financial services and retail entry process and the time required:

In the financial services industry, foreign-invested enterprises usually need to apply for a service license. Taking the banking industry as an example, when foreign banks enter the Vietnamese market, they first need to obtain approval from the State Bank of Vietnam. During the application process, foreign banks need to submit detailed business plans, financial status reports, risk management plans and other materials. In addition, Vietnamese government requirements for capital and local partners must be met. Approval time usually ranges from 6 months to 1 year, depending on the size and scope of the bank’s business. If it is a foreign-funded insurance company, the admission process is more complicated, and the company needs to further apply for a business license after obtaining approval from the Monetary Authority.

For the retail industry, foreign-funded enterprises need to apply for a foreign-invested retail business license when entering large-scale retail markets. According to Vietnam’s Investment Law and Commercial Law, foreign-invested enterprises usually need to undergo an economic needs test (ENT) when opening their first retail store. ENT is mainly used to evaluate whether the market needs new retail businesses and whether foreign-invested retail companies will have a negative impact on the local retail industry. The approval time for ENT is usually 1 to 3 months, but if the local market competition is fierce or policies change, the approval time may be extended. In addition, foreign-invested retail enterprises also need to apply for other relevant licenses based on store size and business type, such as fire safety licenses, food hygiene licenses, etc.

Generally speaking, the time required for the entry process of foreign-invested enterprises in Vietnam’s service industry is usually between 6 months and 1 year. Businesses should consider possible approval delays when planning entry and, if necessary, work with local partners to expedite the process.

Whether in the manufacturing or service industries, when foreign-invested enterprises enter the Vietnamese market, they need to prepare all necessary documents and application materials in advance and maintain close communication with relevant departments. At the same time, understanding the changing trends of local policies and adjusting application strategies in a timely manner will also help companies successfully pass the approval process.

Latest policies and industry changes

Vietnam’s policy environment and industry trends are constantly changing, and foreign-invested enterprises must pay close attention to these developments when entering the Vietnamese market. Understanding the latest policy directions and industry trends can help foreign-funded enterprises make more informed investment decisions and stay competitive in the market.

1.The latest policy guidance of the Vietnamese government

In recent years, in the process of promoting economic development, the Vietnamese government has introduced a number of policies to attract foreign investment and promote industrial upgrading. These policy changes are mainly reflected in tax incentives, environmental protection regulations, industrial development planning, etc., and have had an important impact on foreign investment access.

First of all, the adjustment of preferential tax policies is one of the important means to attract foreign investment. The Vietnamese government provides various forms of tax incentives depending on the industry and region. For example, in encouraged industries such as high-tech and green energy, foreign-invested enterprises can enjoy policies such as corporate income tax reduction and exemption, and preferential import tariffs. In addition, Vietnam also promotes the development of specific industries by reducing value-added tax and export taxes in certain industries. However, as Vietnam’s economy continues to develop, these tax preferential policies are constantly being adjusted. Foreign-invested enterprises need to keep abreast of the latest policy changes in order to enjoy the corresponding preferential treatment.

Secondly, the Vietnamese government’s increasing emphasis on environmental protection regulations also affects the entry conditions for foreign-invested enterprises. As environmental protection standards improve, the Vietnamese government has increasingly stricter requirements for foreign-invested enterprises in terms of pollutant emissions, waste treatment, and energy use. For example, the Environmental Protection Law introduced in recent years has put forward higher environmental protection requirements for new projects. Foreign-funded enterprises must pass more stringent environmental impact assessments (EIA) when investing in manufacturing projects. In addition, Vietnam also encourages foreign-invested enterprises to adopt green technology and renewable energy. These new regulations will undoubtedly increase the compliance costs of foreign-invested enterprises.

The Vietnamese government’s industrial development plan is also one of the focuses of foreign-invested enterprises. In order to promote the transformation of the economic structure, the Vietnamese government has formulated a number of industrial development plans, such as the “2021-2030 National Development Strategy”, the Industry 4.0 Plan, etc. These plans have clarified Vietnam’s key industries and regions for future development. If foreign-funded enterprises can connect with these plans, they are expected to obtain more policy support and market opportunities. For example, in the fields of digital economy and innovative technology, the Vietnamese government strongly supports investment by foreign-funded enterprises and provides a series of policy support measures.

2. Industry trend analysis

With the rapid development of Vietnam’s economy, some emerging industries are rising, providing broad development space for foreign-funded enterprises. The following is an analysis of several hot industries with development potential and their future trends:

First of all, e-commerce and digital economy are areas of great concern in the Vietnamese market. Vietnam’s Internet penetration rate continues to increase, and the number of users of mobile payment and e-commerce is rapidly expanding, especially among the younger generation of consumer groups, their influence is gradually increasing. The Vietnamese government actively promotes the development of the digital economy and has introduced a number of supporting policies, such as the National Digital Transformation Plan, to accelerate the popularization of e-commerce and digital technology. This provides foreign-funded enterprises with good investment opportunities, especially in cross-border e-commerce, financial technology, digital payment and other fields. In the next few years, with the popularization of 5G networks and the improvement of digital infrastructure, Vietnam’s e-commerce and digital economy will continue to maintain rapid growth.

Secondly, the green energy industry has broad prospects. As global attention to climate change issues intensifies, the Vietnamese government is also accelerating the transformation of the energy structure and promoting the development of renewable energy. In recent years, Vietnam has attracted a large amount of foreign investment in fields such as solar energy and wind energy. The government has also formulated the National Renewable Energy Development Plan with the goal of significantly increasing the proportion of renewable energy in the next 10 years. For foreign-funded enterprises, participating in green energy projects in Vietnam is not only in line with the global sustainable development trend, but also able to enjoy various policy supports provided by the Vietnamese government.

High-tech industries in manufacturing are also the focus of foreign-funded enterprises. Vietnam is transforming from traditional manufacturing to high-tech manufacturing, and the government encourages foreign-funded enterprises to invest in areas such as smart manufacturing, artificial intelligence, and semiconductors. Vietnam’s young labor force is abundant and increasingly educated, providing strong support for the development of high-tech industries. In the future, with the advancement of Vietnam’s Industry 4.0 strategy, high-tech manufacturing will become an important opportunity for foreign-funded enterprises to enter the Vietnamese market.

Finally, the medical and wellness industry is also an area with huge potential. The aging trend of Vietnam’s population and growing health needs have brought new market space to industries such as medical equipment, pharmaceuticals, and health management. The Vietnamese government has adopted a number of policies to encourage foreign-funded enterprises to invest in the medical field, such as relaxing foreign shareholding restrictions and simplifying the approval process. If foreign-funded enterprises can develop their presence in the medical and health fields, they are expected to seize the growth opportunities in the Vietnamese market.

When foreign-invested enterprises enter the Vietnamese market, they need to pay close attention to the government’s latest policy guidance and changes in industry trends. By choosing industries that are in line with policy guidance and consistent with Vietnam’s economic development goals, foreign-invested enterprises can better adapt to the market environment and obtain long-term development opportunities.

Practical cases and experience sharing

In the Vietnamese market, the success or failure of foreign-funded enterprises is often closely related to their understanding of entry restrictions, policy changes and local culture. By analyzing some actual cases, we can have a clearer understanding of which strategies can help companies break through industry entry restrictions and achieve success in the Vietnamese market. At the same time, we can also learn from failure cases and avoid common pitfalls.

1.Successful cases

Foreign-funded enterprises that successfully enter the Vietnamese market usually have the ability to flexibly respond to policy changes and have a deep understanding of local culture. Here are a few typical success stories:

When a Japanese electronics manufacturing company entered the Vietnamese market, it successfully took advantage of the Vietnamese government’s encouragement policies for high-tech industries. The company has set up an R&D center in Hanoi and cooperated with local universities and research institutions to improve its technical capabilities. This deep cultivation of local resources has allowed it to occupy a place in Vietnam’s electronics manufacturing industry. In addition, the company has established good supply chain relationships with local enterprises in Vietnam, which has not only reduced production costs, but also successfully passed Vietnam’s Environmental Impact Assessment (EIA) and received policy support from the government.

Another real estate development company from South Korea successfully obtained a project to build a large commercial complex in Ho Chi Minh City by working closely with the local government in Vietnam. Before entering the Vietnamese market, the company carefully studied Vietnam’s land use rights policy and successfully overcame land use rights restrictions through joint ventures with local partners. In addition, they have successfully taken advantage of the Vietnamese government’s preferential tax policies for infrastructure projects, reducing project costs and enhancing competitiveness.

An educational institution from Singapore has also achieved success in Vietnam. This institution meets the needs of the Vietnamese middle class for high-quality education by setting up international schools. They strictly abide by Vietnam’s education policies, maintain communication with the Ministry of Education of Vietnam on teaching content and teacher selection, and set reasonable tuition standards, successfully avoiding policy minefields. In addition, this agency has enhanced its adaptability in the Vietnamese market through localized management and cultural integration, and has achieved a good reputation and market share.

These successful cases show that when foreign-funded enterprises enter the Vietnamese market, if they can have an in-depth understanding of local policies and regulations and establish close cooperative relationships with local partners, they can effectively break through industry access restrictions and achieve steady business development.

2.Lessons from failure

However, not all investments by foreign-funded enterprises in the Vietnamese market are smooth. The following are several cases of foreign-funded enterprises encountering setbacks in the Vietnamese market. Analyzing the reasons for these failures can help other enterprises avoid similar mistakes.

When a pharmaceutical company from Europe entered the Vietnamese market, it ignored Vietnam’s strict drug approval procedures and the complexity of the local market. They were eager to set up a production plant in Vietnam, but failed to pass Vietnam’s drug registration and approval without fully understanding Vietnam’s drug regulatory policies. This oversight resulted in investment projects being delayed and ultimately failed due to compliance issues. The company’s lesson lies in its failure to thoroughly research Vietnam’s industry regulations and its failure to find suitable legal and marketing consultants locally.

An American retail company also encountered setbacks in the Vietnamese market. This company was eager to expand its business without fully understanding the entry restrictions in Vietnam’s retail industry. As a result, it encountered policy obstacles in terms of shareholding ratio and investment thresholds. Although they invested a lot of money, they were ultimately unable to gain a foothold in the Vietnamese retail market due to their failure to establish effective cooperation with local partners. The company’s failure reflects that foreign-invested enterprises must fully study local regulations and find suitable local partners before entering the Vietnamese market.

Another construction company from Australia encountered cost overruns and schedule delays on multiple projects due to a lack of full understanding of the market environment and competitive pressures in the Vietnamese construction industry. The company underestimated the competitiveness of local Vietnamese enterprises and failed to adapt to Vietnam’s project approval process and construction regulations. Eventually, the company had to withdraw from the Vietnamese market and suffered significant financial losses. This case reminds foreign-funded enterprises that before entering the Vietnamese market, they must carefully evaluate the market competitive environment and ensure that their project management and execution capabilities can adapt to the needs of the local market.

It can be seen from these failure cases that foreign-invested enterprises must be alert to the multiple challenges of regulatory complexity, cultural differences and market competition when entering the Vietnamese market. If they fail to adequately prepare for and respond to these issues, foreign-funded enterprises may face greater risks in their investments. The key to successfully entering the Vietnamese market is to have a deep understanding of local policies, respond flexibly to market changes, and establish strong cooperative relationships with local partners.