The last 47 years have witnessed several milestones in the establishment and development of the bilateral relationship between Vietnam and the Philippines. The two countries have cooperated across various areas, especially in their investing  and trade activities. Hosted recently, the 10th Meeting of the Joint Committee on Bilateral Cooperation has proposed several prospects for further promotion of the Vietnam - Philippines strategic partnership and opened investment opportunities for investors in both countries. This article highlights the expansion of the two countries’ relations through important milestones, statistics, and government support. 

Highlights of Vietnam - the Philippines relationship

Vietnam and the Philippines established diplomatic relations on July 12, 1976. Since then, the two countries have signed several agreements and established cooperation mechanisms to enhance their relationship. In 1992 and 1994, they signed the Maritime Agreement and the Agreement on the Establishment of the Joint Commission for Economic, Scientific, and Technical Cooperation. In 2001, they signed an agreement to avoid double taxation.

In 2007 and 2011, they signed the Action Program for the periods of 2007-2010 and 2011-2016, respectively, to promote cooperation in various areas. In 2014, they established the Philippines-Vietnam Friendship Association. The most significant milestone in their relationship came in 2015 when they elevated their relationship to a strategic partnership, bringing benefits to both countries and promoting bilateral cooperation in depth.

In 2019, they signed the Action Program to implement the Strategic Partnership for the period of 2019-2024, aiming to strengthen cooperation in various areas, including defense and security, trade and investment, education and training, culture, and people-to-people exchanges

The strategic ties between Vietnam & the Philippines

The Vietnamese and the Philippine leaders have underscored the importance of their countries' strategic partnership in ASEAN, with high-level officials and business communities recognizing the recent visit as a significant milestone in bilateral relations. 

During the Vietnam - the Philippines Investment and Trade Forum, Chairman of the Vietnamese National Assembly, Vuong Dinh Hue, emphasized that Vietnam and the Philippines share numerous strategic and similar values, hold important positions in ASEAN, and are two vibrant developing economies that can learn from one another's experiences.

Mr. Paul Vincent L. Uy, Representative of the Embassy of the Republic of the Philippines in Hanoi, affirmed that the Philippines and Vietnam have a good political relationship at all levels. The two countries share many similarities in terms of geography, population, culture, and level of development, and complement each other well in production and trade.

The bilateral trade between the two countries has made significant progress. The two-way trade turnover between Vietnam and the Philippines in 2022 witnessed a sustainable growth of 15% compared to the previous year. There are increasingly more Philippine companies investing throughout Vietnam's territory.

In his overview of the economic and social development situation in Vietnam, as well as his assessment of the results of the two countries' relationship in the past and the potential for future bilateral cooperation, Chairman Vuong Dinh Hue stressed that Vietnam and the Philippines share many strategic and similar values, and are two dynamic developing economies with a two-way trade volume of USD 8 billion in 2022.

Mr. Zubiri - The President of the Philippine Senate, believes that Vietnam and the Philippines have great potential for cooperation in the fields of economy, trade and investment. He hopes that the two countries will continue to strengthen cooperation, promote exchange and investment between the two countries, contributing to the development of the economy and society of both countries.

Vietnamese National Assembly Vuong Dinh Hue and The President of the Philippine Senate Juan Miguel Zubiri in Investment and Trade Forum - 2022 (Source)

In conclusion, Chairman of the National Assembly Vuong Dinh Hue stressed that both sides have enormous cooperation potential, and today's forum is one of the driving forces for establishing cooperation mechanisms. The governments and National Assemblies of both countries will create all necessary conditions, but the success of this initiative will ultimately depend on investors and businesses.

Vietnam & the Philippines economic - trade relationship 

According to the reports of the authorities, the Philippines is the fifth largest trading partner of Vietnam with the two-way trade turnover increasing by 3.5 times, from USD 2.4 billion in 2010 to USD 8 billion in 2022, and the largest importer of rice from Vietnam. In the first 5 months of 2023, Vietnam has exported 1,5 million tons (over USD 770 million) of rice to the Philippines, accounting for 42,3% of Vietnam’s total rice exports. In the meantime, Vietnam is the Philippines’ 11th trading partner and the 12th export market of the Philippines.

Despite the challenges posed by the COVID-19 pandemic, both sides have evaluated their relationship as having developed positively in recent years, with bilateral trade becoming a bright spot. In 2021, the total two-way trade between the two countries reached a record high of USD 6.8 billion, and at the end of 2022, it reached nearly USD 8 billion.

In a message to the business community of the two countries, President of the National Assembly Vuong Dinh Hue  proposed that the business community of the two countries continue to promote investment and trade cooperation, and strive to achieve total two-way investment of over USD 1.5 billion and trade turnover of USD 10 billion by 2026, in order to strengthen the connectivity and complementarity between the two economies, on the occasion of the 50th anniversary of the establishment of diplomatic relations between the two countries.

As of October 2022, the Philippines has 89 investment projects in Vietnam with a total registered capital of nearly USD 607 million and ranks 30th out of 141 countries and territories investing in Vietnam. Vice versa, Vietnam has 05 investment projects in the Philippines with a total investment capital of USD 4 million in the fields of software development, services and trade.

JG Summit Holdings is currently the largest Philippine investor in Vietnam, with an accumulated capital of USD 200 million through two subsidiaries - URC and Cebu Pacific, focusing on manufacturing food and beverage products. In June 2023, AC Energy (Acen) from the Philippines completed its first acquisition phase of 49% ownership of the solar energy project “Solar NT” in Vietnam from Super Energy Corporation (Thailand), the total value of which reached up to USD 165 million. 

Prospects and trends in future bilateral relations

On August 2nd 2023, in Hanoi, Foreign Minister Bui Thanh Son and Foreign Minister Enrique Manalo of the Philippines co-chaired the 10th Meeting of the Joint Committee on Bilateral Cooperation between Vietnam and the Philippines. The two sides agreed on a number of specific measures to further promote cooperation in all areas, including:

• Strengthening exchange of delegations and high-level contacts, especially the visit of Philippine President Ferdinand Romualdez Marcos Jr. to Vietnam at an appropriate time;
• Effectively implementing bilateral cooperation mechanisms, including the Joint Committee on Maritime and Ocean Affairs, the Joint Trade Sub-Committee, the Joint Working Group in the field of agriculture, and the Joint Working Group in the field of fisheries.
• Promoting the development of the Action Plan for the Implementation of the Strategic Partnership for the 2025-2030 period;
• Strengthening defense and security cooperation;
• Striving to bring two-way trade turnover to 10 billion USD as soon as possible, with a focus on rice trade;
• Promoting cooperation in the maritime and ocean;
• Strengthening information sharing and coordination in addressing maritime issues in a timely manner;
• Enhancing the effectiveness of cooperation in combating illegal, unreported and unregulated (IUU) fishing activities.
• Promoting cooperation in other important areas such as agriculture, culture, tourism, education, transportation, science and technology, environment, and people-to-people exchanges.

At the end of the 10th Joint Committee Meeting, the Foreign Ministers of the two countries signed the Joint Communiqué of the meeting and agreed to hold the 11th Meeting of the Joint Committee on Bilateral Cooperation in the Philippines at an appropriate time in 2025.

Conclusion 

Looking ahead, there is great potential for further growth in economic and trade relations between Vietnam and the Philippines. The two countries have a number of areas where they can cooperate, such as agriculture, manufacturing, tourism, and information technology. 

If you are a Philippine investor looking to expand your business into Vietnam, Viettonkin Consulting can help. We have extensive experience in the Vietnamese market and can provide you with the support you need to succeed. Contact us today to learn more. With our help, you can take advantage of the many opportunities available in Vietnam and build a successful business. Don’t hesitate to reach out to us! 

As two prominent economic powerhouses in Southeast Asia, Vietnam and Singapore have forged a strategic partnership that spans across various sectors. In this blog post, we will explore the key aspects that make this bilateral relationship thrive, including trade volumes, investment flows, collaborative initiatives, and mutual benefits. Join us as we delve into the dynamic and prosperous trade and investment landscape between Vietnam and Singapore, uncovering the vast opportunities that await those seeking to capitalize on this flourishing partnership.

Overview of Vietnam and Singapore relations

Ever since Singapore and Vietnam set up their formal bilateral diplomatic relations in August 1973, their relations have been strongly tightened. The two countries have signed several frameworks with regards to a variety of sectors, in order to strengthen their bilateral friendship and multifaceted cooperation. Multiple official visits between the leaders of two nations, including bilateral visits and meetings at multilateral forums such as ASEAN and APEC meetings, have also taken place.  In April 2021, Prime Minister Pham Minh Chinh and his Singaporean counterpart Lee Hsien Loong decided to strengthen their cooperation during the war against the Covid-19 Pandemic, as well as continue to further boost the bilateral relationship.

Trade and investment links between Vietnam and Singapore

Trade and investment relations between Vietnam and Singapore have been a significant factor in forging robust bilateral ties. In this regard, it is crucial to mention the highlight of the bond between these two ASEAN powerhouses: the Singapore – Vietnam Connectivity. Established in 2006, the SVCFA is an annual platform that plays a key role in the mission of maintaining the economic bilateral relations between Vietnam and Singapore.  

Ever since the implementation of the SVCFA, a conducive environment with various investment opportunities in Vietnam for Singaporean business has been incubated.  Annual Connectivity Ministerial Meetings are also organized in order to review the progress of the six sectors of cooperation under the framework, namely, education and training, finance, information technology, and telecommunications, investment, trade and services, and transportation. Hitherto, there have been 16 Connectivity Ministerial meetings that have been held between both country’s ministers. 

Overall, the bilateral relations between the two countries have been effectively maintained and enhanced, particularly in the field of trade and investment.

Vietnam Singapore Industrial Park – Binh Duong

Foreign Direct Investment (FDI)

Throughout the years, Singapore has maintained its firm position, standing as one of the partners that invest in Vietnam in the most robust volumes. Singapore’s direct investment in Vietnam has increased steadily since 1998, especially in sectors such as real estate, processing, manufacturing, and construction. In the first two months of 2023, Singapore maintained its position as the largest foreign investor in Vietnam among the 51 countries and territories investing in the country. With a contribution of 978.4 million USD, Singapore accounted for approximately 31.6% of the total registered Foreign Direct Investment (FDI) in Vietnam. The nine Vietnam – Singapore Industrial Parks have epitomized the effectiveness of Singapore’s direct investment in Vietnam: VSIP 1, VSIP 2, and VSIP 3 in Binh Duong, VSIP Bac Ninh , VSIP Hai Phong, VSIP Quang Ngai, VSIP Hai Duong, VSIP Nghe An and VSIP Becamex Binh Dinh . 

Singapore remains a top investor in Vietnam, holding the leading position among ASEAN countries and ranking second out of 141 countries investing in Vietnam as of December 2022. Singapore's investments are spread across 51 out of Vietnam's 63 provinces and cities. On the other hand, Vietnam has 140 valid investment projects in Singapore, with a total registered capital of over $586 million.

By December 2022, Singapore had invested in 18 diverse industries, leading to an 11.6% increase in the import-export turnover between Vietnam and Singapore compared to the previous year. However, given the overall economic decline in 2023, sustaining or surpassing the trade growth achieved in 2022 will present significant challenges. Despite the complex global economic landscape, the progress made by Singaporean investors in terms of investment cannot be overlooked.

Singapore's investment impact in Vietnam has remained strong and consistent, with the country being a frontrunner among the pioneering ASEAN nations in exploring Vietnam's investment market since the 1990s.

HSBC has recently released the results of a large survey of nearly 1,600 companies from six of the world’s largest economies all of which have operations in Southeast Asia - The HSBC Navigator: Southeast Asia (SEA) in Focus Survey. It highlights Vietnam’s skilled workforce, economic resilience during the COVID-19, and how the country is rising as a global production hub due to government incentives and the signing of free trade agreements among many other boons. These highlight the positive investment environment in Vietnam, emphasizing on the advantages of Vietnam and Singapore trade and investment relations.

Trade

Over the past decade, bilateral trade between Singapore and Vietnam also saw a steady rise. Singapore and Vietnam have shared close and long-term economic relations, and their two-way trade grew steadily in the past decade, hitting 31 billion SGD (over 22.9 billion USD) in 2022. Vietnam's exports to Singapore amounted to $3.89 billion in 2021. The primary products that Vietnam exported to Singapore included Integrated Circuits ($469 million), Broadcasting Equipment ($405 million), and Crude Petroleum ($283 million). Over the past 26 years, Vietnam's exports to Singapore have grown at an average annual rate of 8.98%, starting from $416 million in 1995 and reaching $3.89 billion in 2021. In contrast, Singapore's exports to Vietnam in 2021 reached $8.11 billion. The main products Singapore exported to Vietnam were Refined Petroleum ($893 million), Ethylene Polymers ($552 million), and Integrated Circuits ($507 million). Over the same 26-year period, Singapore's exports to Vietnam have increased at an average annual rate of 6.02%, starting from $1.78 billion in 1995 and reaching $8.11 billion in 2021.

Opportunity and Challenges

Opportunity

In 2022, Singapore and Vietnam signed five agreements and several MOUs to strengthen their cooperation in various sectors including trade, digital economy, cybersecurity, clean energy, sustainable development, and intellectual property rights. Both countries actively engage in trade liberalization agreements and multilateral pacts to enhance their economic ties.

Recently, On February 9, 2023, Singapore and Vietnam solidified their economic cooperation by signing multiple MoUs. These MoUs aim to strengthen collaboration in various sectors such as trade, the green-digital economy, as well as maritime and port cooperation. The signings took place during the official visit of Vietnamese Prime Minister Pham Minh Chinh to Singapore, witnessed by Singapore Prime Minister Lee Hsien Loong. Notably, one of the MoUs focuses specifically on economic trade and cooperation, building upon a previous agreement signed between the two nations in February 2022.

With a fast-growing economy, Vietnam offers numerous business opportunities for Singaporean companies in various sectors, namely manufacturing, consumer services, hospitality, food processing, infrastructure, real estate, high-tech manufacturing. With an appealing market profile – low-cost labor, rapid-growing economy, strategic location, and among other strengths, Vietnam is undisputedly an appealing target for Singapore partners to establish businesses.

Challenges

Despite the positive characteristics of the Vietnam trade and investment market, foreign businesses still face numerous challenges, particularly regarding corruption and inadequacy of Vietnam Intellectual property law. Ranking 113th in 2016, in the Corruption Perceptions Index, The Government took the initiative to come up with several relevant legal actions such as giving out approval for the law of accessing information, revising the law on anti-corruption, and incorporating the United Convention against Corruption (UNCAC) regulations. By tackling this severe issue effectively, their efforts have drastically improved the situation, increasing their CPI ranking to 77th in 2022 amongst 180 economies.

Conclusion

Singaporean businesses have steadily remained in Vietnam’s long-term economic prospects and participated actively in various sectors in different parts of Vietnam. So far, Vietnam – Singapore relations have continued to develop in a positive manner, making significant contributions to the process of industrialization and modernization of  Vietnam.

If you are Singaporean investors who need support with setting up a company in Vietnam, please contact the Viettonkin consultant team via email or contact page. With our specialized knowledge and experience in helping foreign enterprises’ getting into the Vietnamese business environment, we can provide detailed advice on procedures, stages, and documents required to prepare for the application of a Vietnam business registration certificate.

Remote business setup and management solutions are in high demand worldwide. Following the emergence of the Covid-19 pandemic, businesses must adapt, survive, and then hope to thrive again in the face of all existing constraints.

After forming a business entity in Vietnam, foreign investors may face a slew of challenges in maintaining and growing it. One of them is to connect with other companies and organizations in order to build a reliable and valuable partner network. As a result, it is critical for investors to conduct due diligence and employ services from a trustworthy agency in Vietnam like Viettonkin to find the right local partners. These include Remote Business Development and Business Matching services.

Our Services

Remote Business Development

Viettonkin offers a number of Remote Business Development services to our clients, in which, by acting as their representative, we will:

• Establish a network of partners in Vietnam and introduce our clients’ products/services to relevant audiences and potential buyers;
• Discuss further engagement for our clients’ products and services with potential Interested Partners in Vietnam;
• Negotiate with potential Interested Partners to finalize the contract in our clients’ best interests.

Scope of Works for Remote Business Development Services

Deliverables

Step 1: Further Understanding of the Client Requirements: -  Set up meetings with [the Client] to discuss procedure and advice, as well as to clarify KPIs, targeted profiles, communication channels, and updates. -  Require the Client to provide preliminary technical training, sales process, and other relevant tasks in order to conduct operations on-site; Step 2: Outreach Campaign and Identification of  Interested Partners -  Perform collateral on potential targets and outreach through communication channels, as well as initial meeting setups for further discussions; Step 3: Facilitating Discussion with Interested Partners -  Liaise between [the Client] and [potential partners in Vietnam] on all technical/business decisions in the event of further communication.  Assist in the negotiation of any contracts that may arise; Note: If no agreement is reached within the first three months, Viettonkin will extend the project for an additional two months at no cost.

-  Weekly report on outreach via various channels, such as cold calls, mass emails, and direct emails; -  Online meetings and/or phone calls between the Client and Interested Partners; -  Meeting minutes with Interested Partners in Vietnam; -  Contract between the Client and Interested Partners.

Business Matching

Lead Management Services

Lead Generation

- Lead identification: Identify VNR500 and VNR1000 corporations, market leaders in key Vietnamese industries, and global enterprises operating in the Vietnamese market that have a large customer base and require systematic, high-tech, and scalable solutions to interact with, manage, and maintain strong relationships with their customers.

- Through local business networks, partner referrals, industry associations, and various other channels, communicate with and build strong relationships with decision makers and procurement department staff in the prospect organizations.

- Assist the Client in establishing strategic local partnerships for increased market presence.

- Utilize previous project industry and market knowledge to streamline and improve the lead sourcing process, and tailor proposals to the needs and nature of prospects' operations.

- Introduce Concentrix's services and propose a win-win collaboration by emphasizing how Concentrix services and solutions can help prospect organizations become more efficient and focused on core values, as well as highlighting Concentrix's significant global presence and past success.

Lead Qualification

- Perform due diligence on prospects to determine lead lifetime value and purchase intent through systematic assessments of prospects' pain (levels of problems that need to be solved) and motivation (eagerness to buy), based on specific criteria provided by the Client.

- Rank and prioritize leads in accordance with the following categories:

• Class A leads: High-value and high-interest;

• Class B leads: Medium-value and high-interest;

• Class C leads: High-value and low-interest;

• Class D leads: Medium-value and low-interest;

(High-value leads are defined as prospects with an annual turnover of more than $500 million. Medium-value leads are defined as prospects with an annual turnover of between $200-$500 million.)

- Target and prioritize Class A and Class B leads exclusively with the goal of capturing high-volume, high-value clients.

Lead Nurturing

- Constantly cater to the needs of Class A and Class B prospects and facilitate communication and information exchange in order to increase lead satisfaction and lead conversion rate.

- Follow up on a regular basis with quality insights and advice in order to foster long-term business relationships.

- Perform lead analysis and lead assessment based on the information gathered during the lead nurturing process to gain a better understanding of prospects' needs and requirements, specific problems, and expected outcomes.

- Stay in touch with the Class C and Class D groups to keep their interest.

Performance Analysis

- Analyze the results of lead generation and lead nurturing at each stage of the lead management process.

- Maintain a lead nurturing database, as well as records of all email correspondences, to generate effectiveness reports based on metrics such as contact rate, response rate, conversion rate, number of contacts required, time for sales closure, and so on.

- Suggest areas for potential improvement and increased return on investment for future lead generation efforts.

Client Engagement and Account Management

- Assist the Client with deal pitching, deal negotiation, and deal closing as needed.

- Assist the Client (as needed) in following up with the Client's clients on a regular basis.

- Assist the Client (as needed) in implementing upselling strategies to continuously increase the customer lifetime value of key accounts.

- Provide consultation on best approach methods applicable to each account, based on accumulated experience from lead nurturing process.

Save Time and Money with Remote Business Development and Business Matching Services from Viettonkin

Viettonkin is proud to be one of the most prestigious consulting firms for foreign investors looking for business opportunities in Vietnam.

Viettonkin is unquestionably a station from which to launch your remote business in Vietnam, with all of the aforementioned Remote Business Development and Business Matching services available. For more information, feel free to contact us.

The current situation of supporting industry 

According to the Department of Industry of the Ministry of Industry and Trade (MIT), Vietnam currently has 2,000 enterprises in spare parts and components manufacturing and processing, in which only more than 300 Vietnamese SMEs are capable of supplying multinational corporations in Vietnam with location-allocation mainly in Hanoi and HCMC. This figure of Vietnamese enterprises in supporting industry is relatively humble. Plus, the linkages between foreign enterprises and domestic private firms, and between small and large enterprises, are still tenuous, indicating a shortage of domestic supply for the manufacturing and processing market. 

For another example, in Vietnam, 20 large automobile assembly enterprises are operating in the auto industry, but only 81 tier-1 suppliers and 145 tier-2 and 3 suppliers are providing input resources for the whole industry. Meanwhile, in Thailand, a modest number of 16 large car assemblers are in operation nationwide, yet the country owns 690 tier-1 suppliers and 1,700 tier-2 and 3 suppliers.

In addition, home-produced raw materials and accessories are mainly deployed by foreign-invested enterprises, while domestic firms have not yet taken advantage of the resources, thereby failing to meet the quality standards for export orders. Indeed, global corporations are seeking domestic suppliers, yet their ability to meet the requirements of home-grown businesses is humble. Global corporation Bosch has been in search of domestic supporting partners for 3 years, however, not a single Vietnamese company has qualified as a potential supplier. This can be attributed to the difficulty in accessing the capital resources of Vietnamese SMEs. The preliminary report on the three-year implementation of the Supporting Industry Development Plan in Ho Chi Minh City (period 2016-2020, with a vision to 2025) also confirmed that the majority of industrial enterprises in the area are small and medium-sized with limited capital and ability to access loans due to lack of collateral.

Solutions and policies from the Vietnamese Government

Aware of the shortcomings of the supporting industry, the Vietnamese Government has made a great attempt to improve and develop the industry through diverse policies and practical solutions, thus advancing manufacturing and processing. 

Under Resolution No.23/NQ-TW issued by The Political Bureau of the Central Committee of the Communist Party of Vietnam in 2018, the supporting industry is on the prioritized list for development. 

Supporting industries play a significant role in economic restructuring towards industrialization and modernization, improving labor productivity and competitiveness, creating added values, and increasing the contribution rate of the processing and manufacturing industry in the whole economy. Therefore, in the orientation of developing supporting industry in accordance with Resolution 115/NQ-CP dated August 6th, 2020, by 2025, Vietnamese enterprises are able to manufacture competitive supporting industrial products, meeting 45% of the necessary demand for domestic production and consumption, and accounting for 11% of industrial production value. Additionally, approximately 1,000 domestic firms have the ability to supply directly to assembly enterprises and multinational corporations in the territory of Vietnam. By 2030, supporting industrial products will meet 70% of the demand for domestic production and consumption, accounting for about 14% of industrial production value. There are about 2,000 enterprises capable of supplying directly to assembly enterprises and multinational corporations in the territory of Vietnam.

Additionally, Resolution 115/NQ-CP specifies several prioritized industries for development that may continue to receive incentivized investment policies from the Vietnamese Government. In detail, the priority includes spare parts, supporting industries for the textile-garment and footwear industry, and supporting industries for high-tech industries in which developing the manufacturing of materials, specialized supporting equipment, software, and services for high-tech industries, developing a system of domestic providers in the specialized supporting equipment, and supporting technology transfer in the high-tech industry. Under the Resolution, 7 key solutions to further develop and perfect Vietnam supporting industry are listed, including (1) Completing mechanisms and policies, (2) Ensuring and effectively mobilizing resources for the development of supporting industries, (3) Financial and credit solutions, (4) Developing domestic value chains, (5) Market development and protection, (6) Capacity building of supporting industry enterprises, and (7) Media information, statistics, and databases. In particular, developing the domestic value chain is of the most importance. The domestic value chain is fostered through effective investment attraction and linkages between Vietnamese and multinational enterprises, and domestic and foreign manufacturing and assembly companies. Furthermore, the Government encourages building concentrated supporting industrial parks, thereby increasing autonomy in input materials for manufacturing, reducing dependence on single imported sources, improving domestic added values, and enhancing the position of Vietnamese enterprises in the global value chain. Along with that, the state agencies support Vietnamese enterprises in the prioritized processing and manufacturing industries to grow into regional-sized corporations, creating spillover effects and leading supporting industry firms under the spirit of Resolution No. 23-NQ/TW.

At the same time, the Resolution also emphasizes the joint role of ministries and branches in promoting supporting industries, thus requiring tight collaboration among ministries and branches to deliver the best results. Notably, MIT has coordinated with the Ministry of Planning and Investment (MPL) to strengthen the investment attraction of major global FDI enterprises, encouraging them to invest in the manufacturing of finished products and the establishment of regional manufacturing plants in Vietnam. Therefore, domestic supporting industry enterprises are now able to participate in the global supply chains. This year, MIT will collaborate closely with multinational FDI enterprises namely Samsung, and Toyota, among others to strengthen the search and connection of domestic raw materials, components, and accessories manufacturers in the replacement of imported sources in the short term as well as in the long term.  In this way, Vietnam can enhance the localization rate of Vietnam-produced products and increase the influence of FDI enterprises in the domestic business community, aligning with the Government opinions on FDI attraction in Development Bridge Forum 2021. 

Besides, the authorities of major cities in Vietnam have created a legal framework for the development of supporting industry. Following Resolution 115/NQ-CP, Decision 504/QD-UBND 2015 was issued by Ho Chi Minh City Council, approving the Outline of the Supporting Industry Development Scheme for the period 2015 - 2020, with a vision to 2025. Hence, Resolution 16/2018/NQ-HDND stimulates investment demand in the supporting industry sector of Ho Chi Minh City for the period 2018-2020. Following suit, Hanoi People's Committee issued Plan 94/KH-UBND on the Program of Supporting Industry Development in Hanoi in 2020. A year after, Plan 49/KH-UBND on the Program of Supporting Industry Development in Hanoi in 2021 was approved to enhance and enforce the implementation of the previous plan. 

Viettonkin believes that with the majority of enterprises being SMEs, Vietnam will move up its global value chain if the country has the right policies and strategies to promote and develop supporting industries. The current situation indicates that supporting industries remains several shortcomings, yet in the upcoming time, the preferential policies and timely action plans from the Government, ministries, branches, and localities will definitely boost the industry to thrive. Thus, this will be an ideal time for foreign investors to start a business in Vietnam. With an experience of more than 10 years in consulting, Viettonkin is one of the leading firms in the industry. Our professionals, who are insightful of the Vietnam market and legislation, can provide detailed advice on helping your companies navigate through the legal processes of setting up business in Vietnam. Let’s get down to work! 

Vietnam fintech has emerged as a rising star in the ASEAN region lately. Why should you choose the fintech market and how to start a fintech business here? Let’s explore.

An introduction to the fintech landscape of Vietnam

Within the context of a robust digital transformation wave covering every aspect of the economy, fintech is definitely on the top list of potential and high-return investments. CSIRO (2019) has considered Vietnam one of the rising stars in the global fintech industry. The fintech ecosystem in the country grew from 44 startups in 2017 to over 130 companies in 2021, as cited by the Vietnam Fintech Report 2020, a remarkable growth rate of 173% within three years. The revenue of the industry was estimated to be $7.8 billion in 2020 (Vietnam Briefing), fueled by the rising adoption of digital transactions, a growing e-commerce sector, and the support of the government in promoting fintech as part of the bigger national plan on pursuing a digital economy by 2030 (Fintech News). The majority of investors in Vietnamese fintech startups are foreign investors, including financial institutions and venture capital funds. For example, Momo's latest series D funding round was co-led by Warburg Pincus and Goodwater Capital at over $100 million USD. 

In recent years, fintech has grown to a multi-disciplinary industry that includes e-wallet payment services, financial literacy, fundraising and crowdfunding, peer-to-peer lending, wealth management services, mobile money, and even the trending sub-sector of cryptocurrencies. Among the 130+ fintech startups, the top 5 most active sectors are digital payments solutions (31%), P2P lending (17%), blockchain (13%), and wealth management and POS services tying at 7.5%. In terms of payment methods providers such as digital wallets, Vietnam ranked high in terms of usage density owing to a young demographic, the rising smartphone users, and the upward development of e-commerce sites according to EY’s ASEAN Fintech Census 2018. Along with the increasing trend of digital payments, the total transaction value of this sector is expected to reach nearly 30 million dollars in 2025. Listed in the top fintech companies in Vietnam are Momo, Nextpay, Zalopay, VayMuon, and Kilimo Finance, among others, specialized in various fields. Consistent with Fintech Singapore’s report on the Vietnam fintech market, whilst B2C sub-sectors dominated in terms of both quantity and investment amount, B2B sub-sectors such as SMEs financing, digital banking, and data/credit/scoring management only amounted to an insignificant number. This helps predict the potential fintech trends in the near future, with new startups perhaps filling in the gap.

However, the past years have also witnessed positive expansions of the digital banking system, signifying cooperation between fintech businesses and traditional commercial banks. As noted by the Digital Banking in Vietnam by Austrade (2020), the banking sector in Vietnam is driven by trends of digital transformation as the Vietnamese government is initiating a strong push towards a digital economy. Innovations in mobile banking, QR code payment, and the cooperation with other e-wallet enterprises have been applied by many banks such as MBBank, BIDV, and Techcombank, which have become even more important in the context of Covid-19. The most recent prominent case is the partnership between Shinhan Financial Group and Grab to develop new payment applications. 

Opportunities for FDI investors in the Vietnam fintech industry

Noted as one of the fastest-growing industries, fintech has been an attractive destination for many investors. According to CB Insights, one out of every five dollars invested in venture capital up to now has been for fintech. Looking at Vietnam’s foreign investment market, between 2019 and 2020, the Vietnamese fintech market attracted 435 million USD in funding, which was the second-highest in the ASEAN region. The increase in e-payment as well as online commerce due to the Covid-19 pandemic has brought confidence to investors in the fintech industry in Vietnam. Undoubtedly, this sector has been on the top of the most attractive investment sectors recorded from the beginning of 2021 up to now. 

How to start a fintech company in Vietnam?

Fintech regulations in Vietnam

At present Vietnamese laws provide neither a definition of fintech nor a single comprehensive regulatory framework for fintech activities, which is a bottleneck for the ecosystem. Current regulations are mostly concerned with fintech activities in the payment industry. Fintech products in the form of Intermediary Payment Service Provider (IPS) are governed by Decree 101 on non-cash payments and Circular 39 on IPS. IPS includes financial switching services, electronic clearing services, payment gateway services, supporting services for money collection and payment, supporting services for electronic money transfer, and e-wallet services. Following this Decree, IPS providers must be locally established enterprises that have obtained a license to provide IPS (“IPS License”) from the SBV. Therefore, foreign investors can invest in fintech in Vietnam through a legal entity. Currently, the government is drafting a new decree that will replace Decree 101 on non-cash payments. One of the new policies mentioned in the Draft Decree amending and replacing Decree 101 is the proposed regulation of IPS agent activities which can be assigned by banks to fintech businesses. If this Decree is passed, the market will be fiercely competitive in terms of service quality and fees.

Regarding the future development of fintech, the government has issued many programs and projects. Among them is the legal framework for virtual assets such as cryptocurrencies as this sector bears a huge potential to the future payment services and the finance industry as a whole and a regulatory sandbox for the fintech sector particularly. As the government has newly issued a draft decree on regulatory sandbox for the banking sector in 2020, it will provide fintech businesses a rigorous legal environment to test their services and products.

Key legal issues when setting up a fintech business

When thinking about establishing a fintech business, here are some key legal issues that you should pay attention to:

• Entity formation and registration
• Licensing and sublicensing, as some fintech activities require a special license, for example, the IPS license - Intermediary Payment Services or a Non-Bank Credit Institution - NBCI
• Registration of appropriate business line
• Special ownership arrangements: stock options, preferred shares, employee stock options, etc.
• Technology contract
• Intellectual property protection and cybersecurity issues

Market access and operational conditions for foreign investors in the fintech industry

As stated above in terms of the regulations focused on electronic payment gateway services, here are some market access and operational conditions for the foreign investors to keep in mind. The most popular form of investment for foreign investors in Vietnam fintech is to license authorities to perform intermediary payment services under their approved business lines. The 6499 VSIC code, interpreted as “Other financial service activities not elsewhere classified (except for insurance and social insurance”, has been the most common for companies providing Payment Intermediary Service at the time being. Additionally, non-bank institutions can only be allowed to undertake the payment intermediary service after attaining a Provision of Payment Intermediary Services (“License“) from the State Bank of Vietnam (SBV). The prime condition for the attainment of this License is a minimum charter capital of at least 50 billion VND. In addition, the company must satisfy the following criteria: a comprehensive business scheme, a legal representative and technical infrastructure, and IT systems appropriate to the requirements of intermediary payment services. As of October 2020, there are 41 licensed service providers in Vietnam approved by the SBV, including Napas, Viettel Pay, and FPT.

You can refer to our ultimate guide to establish a representative office in Vietnam HERE

However, peer-to-peer lending is a special case when it is not included as “Banking Services and Other Financial Services” under WTO commitments between Vietnam and other members. P2P Lending companies in fact, unlike companies in the financial services business, provide a digital technology platform instead of providing money/loans. An Official Letter No. 5228/NHNN/CSTT dated 8 July 2019 of the SBV stated: “In Vietnam, some companies have registered their business lines as financial advisory, financial brokerage, and self-introduction as P2P Lending companies providing services to connect investors and borrowers; however, the current Vietnamese law is yet to have regulations on P2P Lending activities”. Hence, at present, there is no specific business line for P2P Lending Companies to register under the Vietnamese laws and foreign investors have to apply for investment approval from the relevant Ministries and follow the process to obtain the investment license to start a P2P lending business in Vietnam.

Entry strategy for foreign investors in the Vietnam fintech market

The potential of the Vietnam fintech industry is undeniable and foreign investors could choose from a wide array of market entry modes. Here are some of the most notable cases with success entering the Vietnam market. 

In August 2021, Vietnam's fintech ecosystem welcomed an Indonesia-based fintech startup - Kredivo through a joint venture deal. The startup offers “buy now, pay later” solutions, and has partnered with Phoenix Holdings - a company with a diversified portfolio of financial services to establish Kerdivo Vietnam JSC. "The launch of Kredivo in Vietnam, our first market outside Indonesia, is another key achievement and milestone for the business this year," said its COO Valery Crottaz. This is because the country has low penetration of credit cards and a rapidly growing middle class, together with the booming e-commerce market, he added.

In terms of merger and acquisition (M&A) deals, activities are becoming more robust as a massive number of large deals were made in the last few years according to Vietnam Fintech Report 2020. For example:

• In September 2018, Grab acquired a Moca - a Vietnamese mobile payment startup
• In December 2019, Ant Financial acquired a substantial stake in e-wallet eMonkey, and in November 2019, Lazada Vietnam integrated eMonkey into its platform.
• September 2020, Indonesia’s Gojek has acquired a controlling interest in WePay

In conclusion, there are inevitable opportunities for the fintech ecosystem in Vietnam and other fund-raising organizations and investors in the world. The growth of this sector is also well-aligned with government direction towards a digitalized economy and society in the near future. Although the fintech sector in Vietnam still remains a major challenge related to a holistic regulatory framework, a well-trained human resource, and the rapid development of advanced technologies, the Vietnam fintech market is expected to take huge leaps in the future. 

How can Viettonkin Consulting help you?

If you still wonder how to start your fintech business in Vietnam, contact us and our professional consultants will accompany you on the journey to navigate the market, make the right investment decisions and ensure legal grounds on which to start your business operations.

Vietnam is an ideal place in Southeast Asia to expand food and beverage business thanks to stable politics, favourable economic conditions, young population and an increasing middle class. As a result, Vietnam has become the target of many food and beverage giants as a dynamic market in Southeast Asia. 

In recent years, F&B (food and beverage service) industry in Vietnam has become familiar, in fact, McDonald's, Starbucks, KFC, Burger King, Pizza Hut, Loteria, and many others in the market of food and beverage tycoons in the world, all are present in big cities of Vietnam. Yet Vietnam still poses challenges for the food and beverage industry tycoons wanting to invest in the country.

Why Vietnam become the target of many food and beverage industry investors?

The vortex of growth

Vietnam is one of the countries with the young population, who tend to eat out, and has become a big potential market for the food and beverage industry. This not only attracts domestic investors but also foreign giants.

The food and beverage industry in Vietnam is experiencing a high growth rate with the presence of many domestic and foreign businesses. According to Euromonitor Market Research Company, the food and beverage market in Vietnam reached an average growth rate of 18% per year in the period of 2014 - 2019.

High development opportunities

Of all industries, the food and beverage industry have the opportunity to grow most rapidly because this is a basic human need. Especially in Vietnam market, there are many opportunities for businesses and food flavouring companies to grow thanks to the young population structure. Moreover, Vietnam's market is still not saturated, so there are still many opportunities for businesses to develop their products.

What are the challenges that foreign food and beverage industry have encountered doing business in Vietnam?

However, not every well-known food and beverage brands in the world can thrive in Vietnamese market, nor the noisy and series of check-in in the early stages can keep the businesses heat. There are certain barriers that confuse the food and beverage industry tycoons when investing in Vietnam which is mentioned as follow:

The shortage of human resources

Food and beverage industry in Vietnam is facing the problem of lack of human resources. The current speed of restaurant opening in Vietnam is very high, making the industry's human resources become scarce. Previously, when food and beverage businesses recruited, businesses often required many standards, checking a lot of information. However, according to some businesses, now they only need to recruit a sufficient number of employees.

Besides, human resources in Vietnam are abundant but there are limitations in culture, manners and skills that require employers to have appropriate recruitment, training, exploitation and utilization solutions. In addition, businesses must also comply with the provisions on labor relations, social insurance, health insurance, trade unions,etc.

Brand development issues

The problem of developing food and beverage brand is also very difficult to solve. A brand with more value can raise more capital, but in order to do so, it needs to expand the number of stores quickly and the form of choice is usually a franchise. However, the challenge of franchising can be clearly seen, to be consistent with the quality of the food and services provided. In Vietnam, it is common to see different experiences of going to the same brand but different locations.

The difference in culinary culture

Products that are suitable for the tastes and tastes of the people are still the core factors, which are the most important factors that make the success of a food and beverage brand developing in the chain. Therefore, the issue of taste is a top concern. The world's leading food and beverage brands bring to Vietnam eye-catching, novel products typical of Western cuisine. 

However, the majority of Vietnamese people have not really welcomed this new culinary trend, because Asian culinary culture is deeply ingrained in their mind. Meanwhile, food and beverage businesses that do not achieve wide coverage would be easy to lose.

In spite of the presence of the giant McDonald's, the burger is still not a favorite and daily dish of Vietnamese people. So when the purchasing power is not big enough, the market is too small, it is natural for brands with core products such as Burger King or McDonald's to meet.

The race to keep up with consumer's trend

The market of food and catering services has few barriers to entry but the elimination rate is very fast, so it is still a challenge for businesses that want to conquer. Vietnamese people are ready to experience new food services but they may get bored soon. To maintain their revenue, businesses must always be flexible in developing products and services.

In addition, there are other risks facing the food and beverage industry such as:

• Rental rates in prime locations in Ho Chi Minh City and Hanoi are quite high.
• Rental period is not long.
• Staff rarely consider serving in a restaurant a serious profession.
• The cost of transporting some food ingredients from the parent company to Vietnam is very high, resulting in the price of some international fast food chains in Vietnam too high compared to the needs of users.

In fact, the market shows that not every famous food and beverage brand in the world can survive the food and beverage "storm" in Vietnam. There have been many brands "leaving" from Vietnam market such as Tenren milk tea (Taiwan), Gloria Jean's Coffees (Australia). It is important for the food and beverage industry investors to understand customers and the environment doing business in Vietnam.

In short, food and beverage is a potential industry but also involves many risks. Especially encroaching on the Vietnamese market - an emerging market, long enough access time and clear, effective strategies are required. The above article is expected to provide investors with some useful notes for the F&B development plans in Vietnam. And at Viettonkin, we are ready to give investors thorough consultancy to achieve success in the food and beverage market in Vietnam.

You can also check our tips for helping food and beverage company to stay afloat during crisis.

Vietnamese government has been more and more welcoming to foreign entrepreneurs wishing to establish their business in Vietnam. Regulations have been easing up the process, reducing points of contact and making all steps transparent. However, establishing a business can still be a daunting process if unprepared.
Viettonkin Consulting experts are here to assist you walk through the process of establishment a business in Vietnam.

Fundamental knowledge about legal entities in Vietnam

Limited liability company (LLC) and joint-stock company (JSC) are the two main legal entity types for a business to establish in Vietnam.
An LLC includes from 1 to 50 members known as owners or founders but no shareholders.
The other type is JSC which also known as a shareholding company or an incorporation. However, there are at least 3 limited shareholders to share the main revenue and responsibility in this company, which is the best suited for a medium to large size venture. Because the corporate structure is more complex compared to LLC’s one.
There are some other types of entities you can refer at Legal Entities in Vietnam.

Company set-up process

A basic process for all kinds of business to establish in Vietnam:

Step 1: Difficult choices require help to establish a business

Before setting up a business in Vietnam, you need to consider and prepare several information which can be mentioned below:

• Type of your entity (above-mentioned)
• Choose your company name which should be short, straightforward to remember and pronounce, and must not be resembled other enterprises’ names.
• Decide your headquarter place, choose a legal industry to register, determine authorized capital for your business, and select a title for company’s representative in law.

Of course, there are scores of different options you can choose depending on your company’ capacity. Meanwhile, a professional consulting firm will give you practical advices, with clear processes from start to finish, and guide you through the regulations must follow. Taking consulting service saves both time and money to establish a business in Vietnam.

Step 2: Business registration

Your company needs to prepare a dossier to submit to the Department of Planning and Investment and Business Registration Office then waits for getting the result.
A project dossier for establishing a company in Vietnam shall comprise:
For Investment procedures:

• Registration/Request for issuance of Investment Certificate
• A report on financial capability of the investor
• The joint-venture contract or Business Cooperation Contract (BCC) (if anny)
• Other documents required by Vietnam laws.
• Copy of the people’s identity card, passport or other lawful personal certification, for individual members
• Copy of the establishment decision, business registration certificate or other equivalent document, for member organizations
• Copies of the authorization document, the people’s identity card, passport or other lawful personal certification, for authorized representatives.

For forming a Company:

• Request for setting up a Company
• Draft of the company’s charter
• List of members of company
• Copies of the business registration certificates of the foreign member organizations must be authenticated within three months before the date of submission of the business registration dossier by agencies where such organizations are registered
• Written authorization of the investor in case investor is organization and valid copy of the lawful personal certification of the authorized representative. Documents in foreign languages must be translated into Vietnamese, notarized and legalized
• The joint-venture contract or Business Cooperation Contract (BCC) (if any)
• Other documents required by Vietnam laws.

There are the two most important certificates that international investors are obliged to obtain named Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC). The former is from the Department of Planning and Investment, the latter is from local Business Registration Office.
The timeline to register includes 3 basic periods:

Content	Statutory time
Application for IRC	30-45 days
Application for ERC	10-15 days

Step 3: Register the sample of seal

After notifying the licensing authority, your company may have one or several corporate seals that sample are published on the national business registration website as your work requirements.

Step 4: Tax registration

The last important step is register your tax declaration. The good news is your company can register the tax declaration, filling, payment or refunds through the Internet thank to the Circular No. 110/2015/TT-BTC on electronic transaction in Tax Administration.

Especially for foreign-invested business

• Foreign investors must follow the procedures for issuing an Investment Certificate when establishing a foreign-invested company when the company has between 1% and 100% of the capital contributed by the foreign investor from the beginning
• Foreign-invested companies (companies that have been granted investment registration certificates in Vietnam) continue to set up more economic organizations:
  • If the Foreign-invested companies owned from 51% to 100% of the target company's charter capital: The investor must carry out the procedures for the grant of an investment certificate when set up new economic organizations and carry out the procedures of getting the approval from investment authority (approval notification) when purchasing shares or capital contributions;
  • investment in a BCC contract must carry out the procedures applied for foreign investors in case of the Foreign-invested companies owned from 51% to 100% of the company's charter capital;
• Cases in which foreign investors contribute capital or purchase shares in Vietnamese companies that already have business registration certificates (including cases where up to 100% of the companies' contributed capital) are not required to be implemented procedures for issuance of Investment Registration Certificates, except for companies doing business in the field of education and training, if foreign investors purchase beyond 1% of the contributed capital, they also need to carry out procedures for granting Registration Certificates. invest.
• For companies doing business in the field of retailing goods to consumers or retail establishments, they need to apply for more business licenses base on the specific cases;

Note: Currently, in terms of foreign investors who contribute capital with Vietnamese people to set up companies, for example: joint ventures between Vietnam and foreign investors, the optimal and reduced plan Minimum procedures should follow the step-by-step as follows:

• Step 1: Establishing Vietnamese companies;
• Step 2: Apply for a qualified license for conditional professions;
• Step 3: Transfer of capital contribution to foreign investors;
• Step 4: Applying for a business license (Business license issuance procedure only applies to companies doing business in the field of retailing goods to consumers or setting up retail establishments) and others sub-licenses according to the local regulations.

Viettonkin Consulting stands by your side with international know-how and local knowledge for the fast-growing companies throughout the region. If you have any questions, please feel free to contact us via email: info@viettonkin.com.vn or hotline: +84 918 866 858.

Business Guide: Opening Restaurant in Vietnam

Opening restaurant in Vietnam, or coffee shop is not easy and it is an expensive process. The reality shows that a lot of restaurant owners have failed in their first year of doing business. Nevertheless, there are still many other successful restaurant owners as they had good preparation and went on the right direction. Some handy tips below may help you to run a successful F&B business:

Accumulating experiences working in a restaurant

Experience is the key to avoid mistakes and failure from the beginning. The only way to understand deeply about what you are going to do is being a part of it. The first thing you need to prepare before opening your own restaurant is working in a restaurant. You will learn more about how to serve customers enthusiastically and professionally, how to promote and do marketing for your restaurant. Moreover, you will know how to create and setup menu, recruit and train staffs, make payroll and other important components in opening a restaurant successfully.

Conducting in-depth market research

You should find out to understand what customers want; what kind of food they like most; and how competitive the market is. After that, you have to identify who your target customers are, such as students, teenagers or seniors, local people or foreigners? All of the above information will decide your menu, location, decoration and even your marketing plan. Market research also includes researching and analyzing your competitors. They are restaurants that have the same target customers. You need to figure out how they operate, what their strengths and weaknesses are, based on the market research to do a SWOT analysis for starting your business.

Developing a professional business plan

The first thing you have to do is identify short-term and long-term goals of your business.  For business plan, you need to focus on following components:

• Financial plan: You have to decide the scale of your restaurant. The investment capital depends on your financial and human resources along with the market needs. Moreover, you also estimate your money inflow and outflow at least for the first two years.
• Marketing plan: You can develop marketing plan based on the previous market research. You need to decide what marketing method is the most suitable, online marketing or advertising on newspaper. Marketing budget also plays a crucial role since you need to spend a lot of money on it. The cost will rise and you might run out of money soon. While you spend money well, the results would be positive. The marketing plan also includes descriptions of your foods, drink, menu, service standard, and the price for each of those.
• Human resource plan: includes staffing system and policy.
• Operating Plan: includes operation strategy, and a potential exit strategy.

Searching for a suitable location and planning for an attractive layout

It is important to look for a suitable location that has a continuous stream of traffic, convenient parking, and near other businesses. The location should be close to your target customer. If you are focusing on students, the best location will be near universities or schools area. You should be aware of the budget for locations not to double your cost. Once you decide your ideal location, the interior layout and design should be taken into account. The color and decoration need to be built on the interests of target customer.

Obtaining necessary legal licenses

In Vietnam, restaurants are regulated to apply for the Certificate of Investment first, before moving to the next step. Besides, restaurants must be granted for the Certificate of Food Hygiene and Safety and obtained the Alcohol Retail License (If the restaurant wants to sell alcohol) and Cigarette Retail License (If the restaurant wants to sell Cigarette). Most regulatory agencies will work with new restaurateurs to guide them to get familiar with what they should do to meet necessary legal requirements.

Recruiting qualified employees

How many employees do you need? How much is the salary you are planning to pay them? Additionally, the staff’s benefits, complementary and other staffing policies should also be considered. One of the biggest challenges each of restaurant has to deal with is lack of qualified staffs, since they will be the main factor contributing to the quality of foods and services. Furthermore, you need to somehow know the payments of other restaurants so that you can be competitive in the job market, while not spending too much on payroll.

Operation and observation

From the beginning, you have to become a crucial part of your restaurant, and even staying there regularly. Observing everyday will help you quickly find out any shortages and weaknesses in it.  Moreover, having good cost and revenue management is the key elements to balance your business finance.

Owning and running a restaurant is not easy and not for everyone, instead, a lot of works involves that require tangible and intangible resources. However, you can rely on experts in the field to assist you in becoming a successful restaurateur.

(Source: Viettonkin Consultant Team)