OVERVIEW

In the past few years, a growing number of businesses have relocated their operations from China to Vietnam in an attempt to escape rising costs and an increasingly complex regulatory environment.

Located in a strategic position for foreign companies with operations throughout Southeast Asia, Vietnam is an ideal export hub to reach other ASEAN markets.

Compared with other developing markets in the region, Vietnam is emerging as the clear leader in low-cost manufacturing and sourcing, with the country’s manufacturing sector accounting for 25 percent of Vietnam’s total GDP in 2015.

Currently, labor costs in Vietnam are 50 percent of those in China and around 40 percent of those reported in Thailand and the Philippines. With the country’s workforce growing annually, Vietnamese workers are inexpensive, young, and, increasingly, highly skilled.

Another driving force behind Vietnam’s growing popularity is the country’s collection of free trade agreements (FTAs)—most notably, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and EU-Vietnam FTA.

Since the mid-2000s, the Vietnamese government has offered extremely competitive financial incentives to businesses seeking to set up operations in the country, in addition to a zero percent withholding tax on dividends remitted overseas and a low corporate income tax (CIT) rate of only 20 percent. These advantages have enabled Vietnam to become a premier “sourcing economy” in the eyes of many companies.

Current state of Vietnam’s economy

Vietnam is seeing strong growth on multiple fronts. The Vietnamese đồng is currently the third weakest circulating currency as of May 2021, with one United States dollar equalling 23112.04 đồng.

Growth is expected to continue for some time to come – domestic consumption is predicted to increase at a rate of 20 percent per year. With a population of over 95 million and Southeast Asia’s fastest-growing middle class.