How Singaporean Entrepreneurs Can Invest in Vietnam’s Booming Economy

In the dynamic landscape of global investments, one country is making a mark that’s impossible to ignore – Vietnam. With its vibrant economy, strategic geographical location, and an increasingly open market, Vietnam is not just a country; it’s an opportunity, a potential goldmine for investors who know where to look.

If you are a Singaporean business owner wondering how to invest in Vietnam from Singapore, you are not the only one. With its rapid growth, strategic location, young population, and welcoming policies, it’s no wonder that many are considering investing in Vietnam as a lucrative move.

Join The Sentry as we set out on this enlightening journey, revealing not just the steps to investing but also opening a world where opportunities are. We will go into more detail about the many opportunities Vietnam offers and how you, as a Singaporean business owner, can profit from this lucrative emerging market.

Why It’s a Strategic Move for Singaporean Business Owners to Invest in Vietnam

If you’re a Singaporean business owner contemplating your next international investment, you might want to turn your gaze towards Vietnam. This Southeast Asian nation is rapidly transforming into an economic powerhouse, presenting a myriad of opportunities for savvy investors. Here’s why Vietnam is emerging from other countries as an attractive investment destination for Singaporeans:

Growth and Potential of Vietnam’s Economy

In the heart of Southeast Asia, Vietnam has emerged as an economic beacon, demonstrating unwavering growth and unmatched potential in the region:

1. Vietnam has an impressive economic trajectory, with:

• A GDP of $271.2 billion
• A projected annual growth rate of 4% by 2041
• A resilient and attractive economy for investors

1. Vietnam has a demographic advantage, with:

• A youthful population and a vast labor force
• A demographic dividend from a large working-age population
• A vibrant and innovative workforce for various sectors

1. Vietnam has cost-effective operations with:

• Low labor costs and competitive operating expenses
• An appealing destination for businesses, especially in manufacturing and other labor-intensive industries

In a Nutshell:

Vietnam is an amalgamation of a robust economy, a youthful and abundant labor force, a favorable investment environment, and cost-effective operational frameworks. This trinity of advantages cements its position as a promising and favorable environment for business endeavors, beckoning domestic and international investors alike to explore, invest, and thrive.

Each element – economic growth, demographic advantage, and cost-effectiveness – is a pillar supporting Vietnam’s thriving business ecosystem. As more corporations and investors turn their attention towards this Southeast Asian gem, the narrative of Vietnam’s economic ascent is poised to unfold further, marking new milestones in prosperity and innovation.

Infrastructure Development

Urban Transformation

Vietnamese metropolises, spearheaded by Ho Chi Minh City, are witnessing an infrastructure renaissance. From state-of-the-art transportation systems to the rise of smart city projects, this infrastructural upliftment is redefining the urban landscape. For businesses, these developments translate into seamless logistics, efficient operations, and access to a modernized market base, paving the way for unprecedented growth opportunities.

Strategic Geographical Advantage

Vietnam’s strategic positioning near the South China Sea isn’t merely a geographical fact but a significant business advantage. This proximity places it at the heart of crucial maritime trade routes, amplifying its importance in international commerce. For industries reliant on global supply chains, this means faster access to markets, reduced shipping times, and a heightened relevance in regional trade dynamics.

In essence, Vietnam’s infrastructure advancements, manufacturing industry, labor force, and geographical edge synergistically position the nation as a hotspot for businesses, ensuring operational efficiency and strategic market access.

Attractive Tax Incentives for Foreign Investors

Vietnam continues to position itself as an attractive destination for foreign investors, and the Vietnamese government is actively encouraging foreign direct investment through tailored tax benefits. These supportive policies are designed to create a mutually beneficial ecosystem that supports domestic growth, foreign direct investment and capital inflow. Here are some key points about tax incentives in Vietnam:

1. Sector-Specific Benefits: The Vietnamese government focuses on pivotal sectors such as information technology (IT). Investors in these areas can enjoy preferential tax treatment, which includes reduced corporate income tax rates and exemptions.
2. Corporate Income Tax Reductions: Foreign investors may benefit from a lower corporate income tax rate compared to domestic companies. The specific rate depends on the industry and location of investment.
3. Tax Exemptions: Certain projects or investments may qualify for full or partial tax exemptions. These exemptions can apply to corporate income tax, import duties, and land use fees.
4. Investment Zones: Vietnam designates various economic zones, industrial parks, and export processing zones where investors can enjoy additional incentives. These zones offer streamlined administrative procedures and favorable tax conditions.
5. Duration of Incentives: The duration of tax incentives varies based on factors such as the type of investment, location, and project scale. Investors should consult with local authorities to understand the specific terms.
6. Other Benefits: In addition to tax-related incentives, foreign investors may also receive support in terms of land lease policies, labor regulations, and facility development.

Overall, Vietnam’s proactive approach to attracting foreign investment through these incentives demonstrates its commitment to its growth and international collaboration. As businesses from other countries further explore opportunities in this dynamic nation, understanding the available tax benefits becomes crucial for informed decision-making.

Singapore-Vietnam Economic Synergy

The bonds between Singapore and Vietnam are not just diplomatic but deeply economic. Stalwarts like Lee Hsien Loong have emphasized the importance of nurturing this bilateral relationship. Furthermore, Singapore’s consistent investment in Vietnam across diverse sectors bears testament to this bond.

A concrete manifestation of this robust partnership lies in the Singapore-Vietnam Industrial Parks (VSIPs). Established in 1996, VSIPs have become a cornerstone of the bilateral economic relationship. With an influx of over $18.4 billion in investments and the creation of approximately 300,000 jobs, these industrial parks exemplify the synergy between the two nations. Offering a blend of favorable operational costs, favorable conditions, and a supportive business environment, VSIPs serve as a beacon, drawing investors to explore and capitalize on the flourishing economic landscape forged by the Singapore-Vietnam partnership.

Understanding the Legal Landscape of Vietnam Investment

Negative Lists (Prohibited and Conditional Sectors)

The Law on Investment No. 61/2020/QH14 (LOI 2020) in Vietnam provides guidelines for foreign investment. It includes two important lists:

1. Prohibited List: This list identifies sectors where foreign entities are not allowed to invest. It includes activities such as press, sending Vietnamese workers abroad under contract, industrial property representation, and certain tourism services.
2. Conditional List: This list outlines sectors with specific market access conditions. If foreign investors meet these conditions, they are permitted to invest in these sectors. The list covers both the manufacturing and service sectors.

Market access conditions for sectors on the Conditional List will be published on the National Portal on Investment, providing additional guidance for foreign investors.

Overall, the LOI 2020 plays a crucial role in regulating foreign investment in Vietnam. It ensures that foreign investors abide by the rules and guidelines outlined in the Prohibited List and the Conditional List.

General List

The General List encompasses a comprehensive set of prohibited and conditional sectors that apply to all business entities, whether domestic or foreign.

Unlike the Negative Lists, which specifically target foreign investment, the General List ensures that businesses adhere to regulatory requirements related to their specific activities. Compliance with the General List involves several factors:

1. Legal Capital Requirements: Businesses must meet minimum capital thresholds as specified by regulations.
2. Facilities and Infrastructure: Entities must possess appropriate facilities and infrastructure to operate within the legal framework.
3. Technical Conditions: Compliance with technical standards and specifications relevant to the industry or sector.
4. Licenses and Certificates: Obtain the necessary licenses and certificates to conduct business activities.

By adhering to the General List, businesses contribute to maintaining regulatory standards and operating within established guidelines.

For more detailed information, you can refer to the IMF’s article on the world’s top recipients of foreign direct investment and the OECD’s data, analysis, and forecasts on foreign direct investment.

National Laws

In addition to international commitments, investors must also take into account additional conditions outlined in Vietnamese national laws. These conditions can differ depending on specific legal or licensing requirements, which may include:

• Sublicense requirements: Certain business activities may necessitate obtaining sublicenses in addition to the main license.
• Human resource conditions: Vietnamese laws may stipulate specific requirements regarding the qualifications or number of employees for certain types of businesses.
• Enterprise-type requirements: Different business structures may have specific conditions that need to be met according to Vietnamese regulations.
• Location restrictions: There may be rules governing the locations that are acceptable for particular types of businesses or restrictions on operating in specific areas.
• Collaboration with local partners: In some cases, foreign investors may be required to conduct business in Vietnam along similar lines as local partners.

Considering and complying with these additional conditions specified by Vietnamese national laws is crucial for investors to ensure their operations align with Vietnam’s legal framework and requirements.

How to Invest in Vietnam from Singapore

Foreign investment in Vietnam is subject to certain legal regulations. It’s imperative for Singaporean investors to familiarize themselves with these administrative procedures to ensure a smooth investment process.

Exploring Investment Avenues

Vietnam Stock Market

Vietnam has emerged as a promising market with fast-growing major economies and ample investment opportunities. For investors based in Singapore who are looking to diversify their portfolio, the Vietnam stock market can be an intriguing option. Here are some ways to invest in the Vietnam stock market from Singapore:

1. Brokerage Firms: Numerous brokerage firms operate in Singapore that have links or partnerships with Vietnamese securities firms. These brokerages can act as intermediaries, offering services like buying and selling Vietnamese stocks on behalf of their clients. Before choosing a firm, it’s essential to review its fee structures, services, and reputation.
2. Online Platforms: With the evolution of digital technology, several online platforms now enable international investments. These platforms allow investors to trade directly on foreign stock exchanges, including Vietnam’s.

Direct Investment

Apart from the stock market, there are other ways to invest in Vietnam:

1. Businesses: Singaporean investors can identify and invest in Vietnamese businesses directly. This could be through joint ventures, partnerships, or buying stakes in local companies.
2. Real Estate: The Vietnamese real estate market has seen significant growth and offers opportunities in both residential and commercial sectors. Singaporean investors can buy property directly or invest in real estate development projects in Vietnam.
3. Setting up an Enterprise: Another direct investment method is setting up a business or enterprise in Vietnam. Singaporeans can tap into local demand by establishing a company, especially in sectors with evident growth potential.

Accessing Vietnam Stocks

Option 1: Open an Account With a Singapore Broker

Singaporean investors can consider opening a brokerage account locally to access Vietnam’s growing market. Here, we elaborate on options provided by some of the renowned brokerage houses.

When choosing a broker, it’s crucial to compare their fees, minimum investment requirements, and trading procedures. It’s worth noting that online trading for Vietnam stocks might not be directly available due to local regulations. As a result, investors may need to place trades via phone calls.

Option 2: Invest via US-Listed Vietnam ETFs

Exchange-traded funds (ETFs) are an excellent way for investors to gain exposure to a diversified portfolio of assets without buying each asset individually. There are Vietnam-focused ETFs listed on US exchanges that provide exposure to the Vietnamese stock market. This option provides investors a less direct but more accessible means to invest in Vietnam.

Process of Investment: Investing in Vietnam-focused ETFs listed in the US is akin to investing in any other US-listed securities. Singaporean investors need an account with a brokerage firm that provides access to US stock exchanges. The steps are generally as follows:

1. Choose a Brokerage Firm: Select a reputable brokerage that allows trading US-listed securities. Consider factors like transaction fees, user interface, customer support, and additional services offered.
2. Research Vietnam ETFs: Identify the ETFs that focus on Vietnamese stocks. Assess their portfolio, performance history, management fees, and other pertinent details to ensure alignment with investment goals and risk tolerance.
3. Buy the ETFs: Place an order to buy the chosen ETF. Investors can decide the number of shares they want to purchase based on their investment capacity. It’s essential to monitor the investment regularly and stay informed about both the US and Vietnamese markets.
4. Monitor and Manage: Regularly assess the performance of the ETFs and consider diversifying the investment to mitigate risks and enhance potential returns. Investors should also stay abreast of geopolitical, economic, and regulatory developments in both countries.

Benefits of Investing in US-Listed Vietnam ETFs: This investment route offers a slew of advantages, including diversification, professional management of the fund, liquidity, and ease of trading. Investors can buy or sell their ETF shares quickly, enjoying real-time pricing transparency. Additionally, US-listed ETFs adhere to stringent regulatory standards, offering an added layer of security for international investors.

Key Sectors for Foreign Investment in Vietnam

Information Technology (IT) Industry

As technology becomes ever more entrenched in daily life, Vietnam’s tech industry thrives. With its young and tech-savvy population, the country saw a surge in tech startups, software houses, and business process outsourcing centers.

Vietnam’s IT market had an estimated value of USD 7.7 billion in 2021 and is expected to grow at approximately 8% per year from 2022 to 2026 as both the public and private sectors increase the adoption of ICT solutions. The government has identified ICT as a major industry and socio-economic growth driver, encouraging advanced solutions for better governance services and operational efficiencies.

Renowned international investors and incubators have made their presence felt in Vietnam, making the startup scene even more vibrant.

Industrial Zones (IZs) and Economic Zones

Much of Vietnam’s economic growth in the past decade was enabled through the movement of Vietnamese people from traditional agriculture to the manufacturing and services industries, in addition to the increased mechanization of the agriculture sector.

Vietnam has 343 industrial zones (including export processing zones, manufacturing centers, supporting industrial zones, and ecological industrial zones) and economic zones accounting for about 96,000 hectares. As a result, Vietnam has become a major manufacturing hub for global consumer goods. Specifically, after the US-China Trade War, Apple relocated 11 factories in the supply chain to Vietnam, while LEGO Group began the development of a $1 billion USD manufacturing plant in Binh Duong, with production set to begin in 2024.

These zones attract foreign investors looking to establish commercial presence and factories via foreign direct investments. The Ministry of Planning and Investment coordinates with relevant authorities to formulate master plans for the development of these zones with other countries.

Agriculture & Agri-tech

Agriculture has always been a cornerstone of the Vietnamese economy. With the changing global landscape, there’s a renewed focus on modernizing and optimizing this sector.

In 2021, the value of the agricultural market was approximately USD 40 billion. The push for organic farming, precision agriculture, and innovative technologies has opened doors for investment in agri-tech startups, supply chain technologies, and agricultural machinery. Precision farming techniques, IoT (Internet of Things) devices, and drone technology are being widely adopted by Vietnamese farmers to optimize resource management, reduce waste, and increase yields.

These innovative practices have led to significant improvements in crop quality and quantity, making Vietnam a compelling choice for buyers seeking sustainable sourcing options.

Renewable Energy

Vietnam’s commitment to green energy and sustainable development is driving investments in renewable energy projects.

Opportunities exist in wind, solar, and hydroelectric projects as the country aims to reduce its reliance on fossil fuels. The immense potential for renewables capacity makes Vietnam an attractive destination for investors interested in clean energy solutions.

Real Estate & Infrastructure

Vietnam’s economic growth has led to a significant increase in urbanization rates and a rising middle-class population. The real estate market, particularly in urban centers, has seen a boost in both demand and supply.

As of 2021, the value of the real estate market was estimated at around USD 60 billion, with a projection of steady growth in the coming years. Key areas of interest for investors include residential projects, commercial spaces, and infrastructure development.

The government’s focus on infrastructural development, including transport, housing, and urban planning, provides ample opportunities for many investors. Foreign investors can explore investment options in resorts, hotels, and travel services.

Tourism & Hospitality

With its rich history, diverse culture, and beautiful landscapes, Vietnam has always been a favored tourist destination. The tourism industry contributed approximately USD 32 billion to the national GDP in 2021.

After the COVID-19 pandemic, Vietnam’s tourism industry has been showing signs of recovery. The country welcomed about 3.5 million international visitor arrivals in 2022, making it an attractive destination for tourists.

Investment potentials exist in resorts, hotels, travel services, and other related sectors as the government pushes to promote tourism. This, coupled with the increasing global connectivity, has led to a surge in international tourists.

Need a Base of Operation in the Heart of Vietnam?

Are you a Singaporean entrepreneur looking to expand your business into Vietnam? Look no further! The Sentry offers premium coworking spaces strategically located in Ho Chi Minh City, the economic heart of Vietnam.

Here’s why The Sentry should be your go-to choice:

1. Prime Locations: Our coworking offices are situated in the heart of Vietnam’s major business districts. Whether you’re seeking a vibrant urban setting or a serene coastal view, we’ve got you covered.
2. Flexible Plans: Choose from our flexible membership options – from hot desks for freelancers to private offices for teams. Need a space for a day, a week, or longer? We’ve got plans tailored to your needs.
3. State-of-the-Art Facilities: Enjoy high-speed internet, ergonomic furniture, meeting rooms, and well-equipped kitchens. Our spaces are designed to enhance productivity and foster collaboration.
4. Networking Opportunities: Connect with like-minded professionals, startups, and industry leaders. Attend workshops, seminars, and networking events hosted exclusively for our members.
5. Business Support Services: From mail handling to administrative assistance, The Sentry ensures that you can focus on what matters most – growing your business.
6. Community Vibes: Join a vibrant community of entrepreneurs, creatives, and innovators. Share ideas, collaborate on projects, and be part of something bigger.

Invest in your success by choosing The Sentry as your base of operation in Vietnam. Visit our website to explore our locations, and book a tour today!