The US-China trade war and the COVID-19 pandemic have reinforced to many businesses the importance of a diversified supply chain, and many of our clients from all over the world are shifting manufacturing from China to Vietnam.
Harris Bricken has a long history with Vietnam; we drafted our first Vietnam manufacturing contract more than a decade ago and have had a physical presence in Ho Chi Minh City for nearly as long.
This process predated the current US-China trade war, and early movers were quick to set themselves up in Vietnam, which over the past 10 years has attracted significant foreign investment through ongoing economic reforms, new free trade agreements, a young and increasingly urbanized population, political stability, and inexpensive labor costs.
In 2019 alone, Vietnam attracted USD20.3 billion in foreign direct investment (FDI), and imports of goods from Vietnam to the United States increased 35.6 percent, while goods imported from China to the United States decreased by 16.2 percent. From 2010-2019 inclusive Vietnam attracted USD143 billion in cumulative FDI, of which 59 percent went into manufacturing – especially in the electronics, textiles, footwear, and automobile parts industries.
At the same time, Vietnam continues to present challenges to investors and business operators. Foreign and Vietnamese business owners agree the country would benefit from improving intellectual property rights protection and simplifying legal procedures and tax codes, as well as streamlining the bureaucratic process related to government decision making.
Establishing manufacturing facilities and a logistics infrastructure are complicated processes, and missteps can cost millions. Our deep knowledge of local laws and business and regulatory environment allows us to help our clients identify the most appropriate manufacturing model and operational framework for them in Vietnam.
For companies considering an investment in operations or manufacturing in Vietnam, questions we can help answer include:
- What should be done to protect foreign companies that manufacture in Vietnam?
- What ownership structures are permitted for foreign businesses?
- What are the tax implications of manufacturing and operating in Vietnam?
- Are there special economic zones that offer benefits such as reduced tax and reduced land cost?
- Have some industries been targeted to receive additional tax and other incentives?
- Has Vietnam offered incentives for companies relocating manufacturing from China?
- Are there any special challenges to obtaining visas for foreign workers, e.g. executives and experts?
- What are the advantages of Vietnam’s membership in the ASEAN Economic Community (a single market of more than 600 million people covering 10 countries in the region)?