Vietnam's food trade industry is one of the most dynamic sectors in the country. Fueled by an expanding middle class, rising disposable incomes, and shifting consumer preferences, the increasing demand for high-quality food products is undeniable. From bustling markets in Ho Chi Minh City to modern supermarkets in other major cities, the opportunity for both […]
Vietnam's food trade industry is one of the most dynamic sectors in the country. Fueled by an expanding middle class, rising disposable incomes, and shifting consumer preferences, the increasing demand for high-quality food products is undeniable. From bustling markets in Ho Chi Minh City to modern supermarkets in other major cities, the opportunity for both […]
In the last 30 years, Singapore has grown into a developing financial centre that serves both the local economy and also the Asia Pacific region, and even the wider world. Today, Singapore is successfully regarded by key financial services institutions and industry players as an ideal base to penetrate the markets.
As we have already known that Singapore’s location is in the heart of Asia Pacific, and that makes the country home to many financial institutions. Additionally, the country is a well-established international financial centre too.
The latest Global Financial Centre Index shows Singapore as the third most competitive financial centre in the world, behind only London and New York. Singapore has also overtaken Japan to become the largest foreign exchange centre in Asia, and third largest globally.
The financial services sector is one of the most booming economic areas in Singapore, and moreover, a number of these financial institutions have also chosen the country as their global or regional headquarters.
This is largely assigned to the regulations passed by the Singaporean government that allows for the incorporation of the latest technological trends in the financial sector. As a result, many entrepreneurs including both local and foreign want to set up businesses in this sector.
As for doing business, especially in the financial services industry, there are some favourable regulations that you must follow. In this article, you will be given information on how you can start a business in the financial services sector!
Legislation on Companies in the Financial Sector
The licenses in the financial sector are provided by the Monetary Authority of Singapore (MAS). Regarding the legislation, the Finance Ministry of Singapore provides guidelines that companies in finance should follow strictly. There are types of businesses that you can start in the financial sector, and the following laws that you need to comply too!
The Monetary Authority of Singapore Act → This act spells out all of the procedures that must be followed when starting a banking business in Singapore.
The Banking Law → This spells out the regulations that all banking institutions must adhere to.
The Securities, Future, Trust Companies, and Financial Advisers Acts → These acts provide the requirements for opening business that will be listed in the capital markets of Singapore.
The Insurance Act → This act provides all of the requirements needed for setting up an insurance institution in Singapore.
The Anti-Money Laundering Act → This act provides all of the activities that companies in this sector should tackle money laundering.
Before setting up a company, it is important to have a consultation with the experts on the required procedures and legal requirements for that specific business.
The Financial Services Companies in Singapore
Financial companies fall under the regulations of the Finance Companies Act in Singapore, they also provide credit facilities to Singapore and other corporations. These companies are not allowed to operate in foreign currency or even gold. You can only expand the scope of your activities if your request to the MAS is accepted.
There are several types of financial companies that you can establish in Singapore. They include banks, insurance companies, brokerage firms, investment firms and fintech companies. You will need the licenses for opening up a financial company in Singapore, and these companies that need licenses are:
For local banks, wholesale banks, representative offices of foreign banks, branch offices, finance companies and financial holding companies.
For exempt trust companies, for corporate finance advisers for fund management companies and licenses trust companies.
For licensed and exempt financial advisers, as well as for exempt persons offering financial advisory services.
For direct life and captive insurers and reinsurers and for captive general and life insurers.
Steps To Incorporate Financial Services in Singapore
Before setting up a financial company, you must meet all the company law requirements. This means the business must have at least one shareholder, one director, and a company secretary. However, all businesses must be registered with the Accounting & Corporate Regulatory Authority (ACRA) through Bizfile. It is an online registration and information portal, including individuals, firms or corporations that have a business for a foreign company.
The application will be processed immediately after its fee is paid, but may take between 14 days to 2 months if the application is referred for another agency to be approved or reviewed.
Moreover, there are 3 steps to register your business in the financial sector!
Step 1: Get The Company Name Approved
Before registering, all Singapore companies must first have their name approved by ACRA. The approval name is a simple online procedure, and the company name must be followed by the guidelines:
The name cannot be identical to an existing business in Singapore
The name must not infringe on any trademarks.
The name cannot be obscene or vulgar.
The name must not have been reserved by another company.
If the company name follows ACRA’s rules, it normally will be approved in less than an hour. In addition, when the process is approved, a company can reserve the name for up to 120 days.
Step 2: Prepare The Company Registration Documents
After the name approval, a company must get the following documents ready before registering the business.
Documents required by ACRA:
Company Constitution, previously known as Articles of Association.
Signed Consent to Act as a Director for each director.
Signed Consent to Act as Company Secretary by the company secretary.
Identification and residential address details for each shareholder and officer of the company.
All the documents above must be in English or officially translated into English.
Step 3: Register with Singapore Company Registrar, ACRA
Once the documents are prepared, a company can be officially registered with ACRA. The registration process is online and takes less than an hour. However, in rare cases, if the company registration has to be referred to another government agency for further review, the process can take a few weeks.
Incorporate financial services or companies in Singapore is relatively easy as long as you understand the law and what company type that you want to have. Additionally, you need to prepare the official documents to register your company. If you are unsure or find the difficulty to keep it up, you may contact us below. Viettonkin will always be ready to assist you anytime!
Franchising is no longer a new business term in Vietnam. In fact, there are a lot of franchising models that are currently run in Vietnam such as KFC, McDonald, Dairy Queen, Circle K, 7-Eleven, and so on. The Vietnamese government has streamlined the franchise laws and regulations to boost franchise business growth. This article provides you with in-depth knowledge about franchising business in terms of regulations and procedures and typical franchising companies in Vietnam.
The regulation of setting up a franchising business in Vietnam
- Decree 35/2006/ND-CP (Decree 35), as amended by Decree No. 120/2011/ND-CP (Decree 35) and Decree 08/2018/ND-CP.
- Decree 120/2011/ND-CP (Decree 120).
- Decree 185/2013/ND-CP (Decree 185).
- Circular 09/2006/TT-BTM (Circular 09).
According to Article 17 of Decree 35/2006/ND-CP (Decree 35), before conducting commercial franchising activities, Vietnamese traders or foreign traders that intend to franchise must register commercial franchising with the Ministry of Industry and Trade. The Ministry of Industry and Trade shall have to register commercial franchising of traders in the commercial franchise register and notify in writing the traders of such registration.
According to Article 17a, the registration of commercial franchising is not required in the following cases: domestic commercial franchising and Vietnam-to-overseas commercial franchising. In such cases, the registration must be reported to the provincial-level Industry and Trade Departments.
Conditions to be met for franchisors and franchisees
For franchisers, the franchisor's business must be in operation for a significant period, for instance, the minimum of one-year operation. Plus, the franchiser must obtain written approval from the Ministry of Industry and Trade.
On the one hand, for franchisees, the franchisee must register their business in relevant sectors with regard to their franchise business in Vietnam. On the other hand, for a master franchisee in Vietnam to sub-franchise to another party in Vietnam when permitted by the franchisor, the master franchisee must also have been operating for at least 1 year before the sub-franchising can be conducted.
Furthermore, the goods or services that are the subject of a franchise agreement must not be on the Government’s list of banned goods and services. If they are on the list of goods and services subject to business restrictions, a special business license must be obtained before franchising is deployed.
Before a franchisor can offer its franchise in Vietnam, the franchisor must ensure that all of the trademarks associated with the franchising activities in Vietnam are either:
- Registered as trademarks with international trademark registrations, where Vietnam is named as a designated jurisdiction.
- Registered with Vietnam's National Office of Intellectual Property (NOIP).
Pre-disclosure requirements
According to Decree 35, the franchisor has an obligation to provide the franchisee with the information regarding the franchise system, namely a copy of a form of the franchise agreement and an introduction of the franchise business, at least 15 days before signing the agreement. The franchisor must also notify the franchisee of all substantial changes in the franchise system.
In case of a master franchise, in addition to providing the aforementioned information, the secondary franchisor must also submit a proposed franchisee with the following information in writing: (a) information about the franchisor which has granted the franchise; (b) contents of the master franchise contract; and (c) the manner in which secondary franchise contracts will be dealt with in the event of termination of the master franchise contract.
Penalty
Depending on the circumstances, a failure to register franchising activity can result in the following sanctions:
- Small fines ranging from VND5 million to VND10 million (approximately US$225 to US$475).
- The forced relinquishment of profits gained from the franchising activity that has not been registered (this sanction can be very problematic for the franchisor).
Steps to set up a franchising business in Vietnam
Required documents
The following documents are the required documents to register a franchise in Vietnam:
- Franchise registration application
- Power of Attorney
- Franchise agreement
- Audited Reports in the last year
- Brief Introduction of the franchisor
- Business certificate (or equivalent documents) of the franchiser
- A copy of the trademark certificate or copyright (if any)
- Papers proving the approval of the primary franchisor’s permission of franchise in case the trader registering to the franchise is the secondary franchisor
Process of setting up a franchising business in Vietnam
The process goes through two main steps: receipt of dossiers of registration of commercial franchising activities and registration of commercial franchising.
In regard to receipt of dossiers of registration of commercial franchising activities, the franchiser submits the required documents at the Ministry of Industry and Trade (MOIT).
- For incomplete and improper dossiers, within two working days after receiving the dossiers, MOIT shall send written notices, made according to a set form, to the franchiser, requesting the supplementation and completion of the dossiers. The time limit for handling dossiers shall count from the time the franchiser registering commercial franchising complete their dossiers.
- Franchisers registering commercial franchising may request to clearly explain reasons for dossier supplementation and completion. MOIT shall have to respond to such requests.
Regarding registration of commercial franchising in commercial franchising registration books, within 5 working days after receiving complete and valid dossiers, MOIT shall register franchisers' commercial franchising in commercial franchising registration books, made according to a set form, and send to franchisers written notices thereon, made according to a set form.
If refusing to register commercial franchising, within 5 working days after receiving complete and valid dossiers, MOIT shall issue written notices thereon, made according to a set form, clearly stating the reasons therefore.
Some typical franchising companies in Vietnam
As of June 2020, there have been 252 franchises activities including franchises from foreign franchisors to Vietnam and franchises from Vietnamese franchisors to oversea. These franchises operate in several sectors such as education, fashion, education, and so forth.
Food and beverage
Case study 1: The Golden Gate Restaurant Group, founded in 2005, currently operates over 21 concepts with nearly 400 restaurants nationwide. It serves 17 million customers each year, and it has planned for further development.
Case study 2: McDonald's entered Vietnam in 2014. As of 2019, it had 22 outlets across the country.
Fashion
Case study 1: Entering Vietnam in 2017, H&M - a world's leading fashion company- has had 9 stores in HCM City, Hanoi and Danang.
Case study 2: Uniqlo first entered Vietnam in late 2019. As of June 2020, it has had 4 stores in Hanoi and HCM City.
Education and training
Case study 1: In December 2017, Maple Bear Global Schools Ltd announced the expansion of Maple Bear Canadian schools into Vietnam. As of 2020, there are currently 3 schools in Hanoi and 3 in Ho Chi Minh.
Case study 2: Arkki is a School of Creative Education for children and youth where pupils learn general innovation skills through architecture. Founded in Finland in 1993, and after 25 years, Arkki has organized thousands of courses and workshops for more than 20,000 children in more than 20 countries. In 2018, Arkki came to ASEAN, starting from Vietnam, with an aim of building a systematic and progressive creative education platform for children and youth from 4 – 19 years old, and to connect children between ASEAN countries, and with Finland through international camps, projects and exchange programs.
Logistics
Case study 1: BEST Express entered Vietnam in 2019. After one year of development, BEST Express now has seven operation centers, more than 100 service points and has 3-20 such points in one province. In Hanoi, it has 20 service points and in HCM City 26.
Case study 2: Entering Vietnam in 2019, ZTO Express now has 12 service points.
Convenience store
Case study 1: The first 7-Eleven store in Viet Nam opened in 2017, making Viet Nam the 19th country to host the world’s largest convenience store chain. Seven System Viet Nam (SSV) is the Master Franchisee of the 7-Eleven convenience store system in Viet Nam, based in Ho Chi Minh City. As of January 2020, Vietnam has 45 stores in Ho Chi Minh City.
Case study 2: Circle K is the first international convenience store chain in Vietnam, with the 1st store opened on December 20, 2008. Circle K Vietnam currently has nearly 400 stores in Ha Noi, Ha Long, Ho Chi Minh City, Vung Tau, Can Tho.
In conclusion, the article covers three main parts. The first part provides in-depth information about regulations about franchising in Vietnam. Steps of setting up a franchising business are introduced in the second part so that investors and business owners can understand clearly about the franchising process in Vietnam. The article concludes with typical franchising companies in Vietnam. Some popular franchising companies are taken as examples to help readers understand the trend of franchising business in Vietnam. If you would like to set up a franchising company in Vietnam and still have difficulties in approaching the market, Viettonkin always supports you to solve your problem.
As Vietnam is attracting ASEAN FDI flow, mergers and acquisitions are more and more popular. Thanks to mergers and acquisitions, investors can enjoy access to customers, locations, and distribution that benefit a lot of businesses in Vietnam nowadays. The Vietnamese government has currently streamlined the M&As process to encourage investment in new sectors and create a favorable investment climate. The article guides you to regulations of mergers and acquisitions and the procedure of doing mergers in Vietnam.
The regulation about mergers and acquisitions in Vietnam
Generally, the Vietnamese government does not issue specific legislation about M&As. Mergers and acquisitions are governed by two laws called the Law on Enterprises and the Law on Investment. Besides, the government also uses the Law on Competition and the Law on Securities but to a lesser extent.
In addition, the law on mergers and acquisitions is clarified in the Law on Enterprise No. 68-2014-QH13 and Law on Investment No. 67-2014-QH13:
- Article 18 explains the rights of companies and individuals to establish an enterprise, purchase shares, and supply capital. There are some restrictions on who can participate, such as state officials, minors, and those prosecuted for criminal acts.
- Article 195 dictates the process and limitations of a merger. In the case of a possible conflict with the Law on Competition, a legal representative of the company must settle the issue with the administrative agency for competition. Once the merge has been completed, the newly formed company must submit notice to the national enterprise registration database.
- Article 25 establishes foreign investor’s rights to contribute to capital and buy capital or shares.
- Article 26 spells out the procedure to contribute to capital and buy capital or shares. The application for registration must be submitted to the Service of Planning and Investment for approval.
Law on Securities
Regarding the Law on Securities, this law governs the acquisition of shares in a public company including public tender offers. Moreover, authorities responsible for enforcing the law are the State Securities Commission (SSC), Vietnam Securities Depository, and the MPI.
Decree 35 provides conditions in which an enterprise can control one enterprise or another one business line:
- The acquiring enterprise gains ownership of more than 50% of the charter capital of, or above 50% of voting shares of the acquired enterprise;
- The acquiring enterprise gains ownership of or the right to use more than 50% of the assets of the acquired enterprise during all or one business line of the acquired enterprise; and
- The acquiring enterprise has one of the following rights, including (1) directly or indirectly decide the appointment, removal or dismissal of a majority or all of the members of the board of directors, chairman of the members’ council, director or general director of the acquired enterprise; (2) decide the amendment of or addition to the charter of the acquired enterprise; and (3) decide important issues during business activities of the acquired enterprise comprising a selection of the form of organization of business, selection of business lines and the geographical area and forms of business; selection to adjust the scale and the business lines; selection of the form and method of raising, allocating and utilizing business capital of such enterprise.
Prohibited M&As Transaction
The threshold of 50% relevant market share provided by the former law is no longer in existence. In lieu of that, significant competition-restraining impact or ability to cause such impact is now used as the ground to decide whether an M&A transaction is approved or not. In brief, an M&As transaction shall be prohibited if it creates significant competition-restraining impact or ability to cause such an impact in Vietnamese market.
Anti-competitive agreement
The new law prohibits certain types of anti-competitive agreements if the firms are in the same market or if the agreements can impact market competitiveness. The agreement prohibits in case firms are in the same market including directly or indirectly fixing prices, sharing customers or markets or supply sources, and controlling the number of goods produced, sold, or bought as well as services provided.
The agreement also prohibits in case companies have a negative impact on market competitiveness such as restraining investments, technical, and technological capabilities; and forcing other companies to sign contracts related to the buying or selling of goods and services or bind them into commitments not related to the content of the contract.
Furthermore, a leniency program has also been introduced in the new law. Now, companies that are part of an anti-competitive agreement may be entitled to leniency if they voluntarily reach out to the government authorities before an investigation is formally opened.
This program will only be available to the first three applicants, with the first applicant being eligible for a penalty exemption of 100%, while the second and third will be eligible for an exemption of 60 percent and 40 percent respectively.
Besides, Decree 35 clarifies that an anti-competitive agreement would not be considered to cause or be likely to cause such “significant anti-competitive effect” in the following cases:
- For enterprises in the same relevant market, the combined market share of the enterprises intending to participate in the agreement is less than 5%.
- For enterprises intending to participate in the agreement from different stages in the same chain of production, distribution, and supply of specific goods/services, the market share of each participating enterprise is less than 15%.
Additionally, you can read further about M&As notification, preliminary appraisal, official appraisal, penalty to understand clearly about Vietnamese regulation of M&As process.
Steps in the mergers and acquisitions in Vietnam
Mergers in Vietnam
Actually, three types of mergers are a merger of two foreign-owned companies, the merger of two local companies, and a merger of a locally-owned company with a foreign-owned one.
When the merger happens, a merger contract is significant, which determines ownership after the merger. Once the merger contract is signed successfully, procedures for the merger take approximately 30 days.
1. Identify the feasibility and legality of the merger and consider the structure of the newly merged company.
2. Sign a non-disclosure agreement to gain further information about the company’s operations, finances, and so on. With these details, the investor must administer due diligence and identify whether the company is sound.
3. The two parties now have to negotiate terms and conditions of the merger, create the contract and a draft of the charter. The contract must detail the parties involved and the specifics and timeline of the merger. Depending on the nature of the plan, it is advisable to obtain preliminary permission from the appropriate authorities. The company is required to notify all employees of the merger and provide creditors with a copy of the contract within 15 days.
4. In certain conditions that trigger the M&A notification , a notification must be sent to the National Competition Committee (NCC) prior to a transaction. After submitting a notification to the NCC, within 30 days the NCC will issue the results of the preliminary appraisal notifying that the M&A transaction is permitted or is subject to an official appraisal. The preliminary appraisal will typically be done in 30 days, but an official appraisal may take an additional 90 days and be extended by another 60 days. As per Decree 35, if the NCC does not provide a response within 30 days, the M&A transaction will be allowed.
5. Submit the application to the licensing authority to receive an investment certificate or certificate of enterprise registration. The application will require a merger contract and a resolution and minutes of the merged company meeting and the merging companies’ meetings where the contract was approved.
6. Based on the type of merger, certain post-merger actions may be required, such as opening an escrow account. The government will update the status of the company in the national enterprise registration database.
7. Submit an application for registration to the Ministry of Planning and Investment (MPI), which must contain details of the investment and either the passport or ID card of an individual or certificate of establishment of an organization.
8. Within 15 days of receipt, the investor will receive either approval or denial of the contribution/purchase.
In conclusion, the article covers two main parts. The first part explains the Vietnamese regulation about mergers and acquisitions. The process of doing mergers in Vietnam is introduced in the next part. The merger procedure in Vietnam goes through eight steps and it takes around one month for your companies to merge together. The second part of M&A in Vietnam will focus on steps of doing acquisition and some case studies of doing M&A in Vietnam. Let’s read the second part!
Vietnam is an attractive destination for ASEAN investors and more and more investors from the United State and Europe pour their capital into projects in Vietnam. Thanks to the strategic business location (near China), establishing a company, a branch or a representative office can help investors or business owners understand the market and build a local team easier. This article will provide you information about a joint venture and steps to set up a joint venture in Vietnam.
What is a joint venture?
A joint venture is a business arrangement in which 2 or more parties agree to pool their resources to establish the business. Each participant is responsible for profits, losses, and costs associated with it.
There are two types of joint venture contracts. The first one is the cooperation between a foreign-invested enterprise and a Vietnamese enterprise. The second one is 100% foreign-invested capital cooperating with a foreign investor on a joint venture contract.
Vietnam creates a favorable investment climate for foreign investors. Nevertheless, some business fields are limited to invest for investors:
- Advertising services
- Services incidental to agriculture, hunting, and forestry
- Telecommunication services
- Travel agencies and tour operator services
- Entertainment services
- Electronic game business
- Container handling services
- Customs clearance services
- Internal waterways transport, rail and road transport services
- Services auxiliary to all modes of transport
If your business falls under any of these, you will need to work with a local partner.
A joint venture is predicted to bring benefits to the organizations because two companies share resources, the sum of two businesses cooperating together will be of greater value than if each worked alone. The joint venture is built based on the shared ownership between the participants in the venture. Besides, joint ventures are not a unique corporate structuring option, partners usually establish a Liability Limited Company (LLC) if there is no desire to list on Vietnam’s stock exchange.
Advantages and Disadvantages of a Joint Venture
Advantages
- Leverage resources and cost savings: take the combined resources of both parties to achieve the goal of the venture. Each company can use comparative advantage to make the most out of the resources that each company has.
- Accessibility to conditional markets that are forbidden by the Vietnamese government: grant investors access to the market that impose ownership restriction to foreign investors.
- Knowledge of a local company: For foreign investors entering into the market for the first time, local partners can provide greater access to suppliers, customers, and sometimes improve a foreign brand’s reputation within the domestic market.
- Governments will have incentives for foreign businesses to invest in Vietnam, therefore it helps share the risk (aviation, oil industry, banking and finance, new market management, and instability) and shares knowledge expertise (business processes, manufacturing methods, scaling up operations).
Disadvantages
- Limited level of independence: decision-making over important issues like expansion, remittance of profits, or terminating operations can create conflicts among partners.
- Differences in opinions, cultural barriers, objectives can compound and further conflicts and make it difficult to cooperate.
- Corruption and bureaucracy in Vietnam's government lead to lack of transparency, uniformity, and consistency for companies doing business in Vietnam.
- Enterprises have not much information about the market and partners, and customs procedures, quality inspection of goods are quite complicated and high cost.
- Difficult to enter the global market dominated by cross-border trade, hence it leads to problems relating to transfer pricing, export resources from inside and outside.
Steps to set up a joint venture in Vietnam
First, regarding 100% foreign-owned company, there are three main steps in setting up a joint venture in Vietnam:
Step 1: Application for an Investment registration certificate
- Execution place: Department of Planning and Investment of the province or city where the investment project/management board of industrial parks and export processing zones is executed for the projects in industrial parks and export processing zones.
- For investment projects subject to an investment policy decision, investors must register their investment policy with provincial-level People's Committees.
- Expected time: 30-45 working days
Step 2: Application for an enterprise registration certificate
- Execution place: Department of Planning and Investment of the province or city where the investment project/management board of industrial parks and export processing zones is executed for the projects in industrial parks and export processing zones.
- Expected time: 10-15 working days
Step 3: Obtain sub-licenses: trading license for trading companies; construction permits, fire safety license for construction companies
- Expected time depends on the type of license, ranging from weeks to months
Second, if a Vietnamese party and a foreign party cooperate, it is required to create a Business Cooperation Contract. In this case, business owners and investors should be aware of some following requirements:
a) With foreign investors holding 51% or more of charter capital or with a majority of general partners that are foreign individuals to economic organizations that are partnership companies;
b) With an economic organization defined in Point a) of this Clause holding 51% or more of charter capital;
c) With foreign investors and economic organizations defined at Point a) of this Clause, holding 51% or more of the charter capital.
- Foreign-invested economic organizations not falling into the cases prescribed at Points a, b and c above shall comply with investment conditions and procedures prescribed for domestic investors upon their investment in establishment of economic organizations; investment in the form of capital contribution, purchase of shares or capital contributions of economic organizations; Investment in the form of BCC contracts.
There are 2 options to classify Business Cooperation Contract (BCC):
- Option 1: Business Cooperation Contract is in the form of jointly controlled assets and BCC in the form of jointly controlled business operations
- Option 2: Business Cooperation Contract in the form of revenue sharing, the pre-tax and Business Cooperation Contract in the form of after-tax profits
Moreover, it is required that foreign investors in BCC contracts shall submit an application for the establishment of an operating officer at the investment registration authority where the operating office is expected to be located. Within 15 days after receiving the document as prescribed in Clause 4 of this Article, the investment registration authority shall issue an operating office operation registration certificate to the foreign investors in the BCC contract.
Especially, some points that investors ought to bear in mind are:
- BCC contracts can be signed between two domestic investors, domestic investors and foreign investors, or two foreign investors. (Article 28 of the 2014 Investment Law).
- Parties to a BCC contract establish a coordinating board to carry out the BCC contract. The functions, duties, and powers of the coordinating board are agreed upon by the parties.
To sum up, this article covers three main parts. The first section provides the definition of a joint venture and some business fields that are limited to investment by foreigners. The second part analyzes the advantages and disadvantages of setting up a joint venture. Then the article concludes with steps to set up a joint venture with regard to 100 foreign-owned companies and cooperation of a Vietnamese and foreign party. If you are an investor and would like to establish a joint venture in Vietnam, Viettonkin is always here to provide you the most professional one-stop solution.
When setting up a manufacturing business in Vietnam, investors need to consider a lot of factors and conduct profound researches on locations in which the factory will establish. No matter who you are, what your nationality is, understanding clearly about regulations and procedures of setting up a manufacturing business in Vietnam is certainly important.
This article today will provide you with must-know regulations and procedures for establishing a manufacturing business in Vietnam.
Regulations of setting up a manufacturing business in Vietnam
Four fundamental regulations mentioned in this sub-part are minimal capital requirements, special requirements, tax reporting, and resident director.
There are many types of land usage rights; nevertheless, under current law, foreigners are entitled to retain a land-use certificate for only 50 years, while locals can have one indefinitely.
Third, tax reporting. When you own a business, you need to have a tax report. The tax report of a business should include the following types of tax: corporate income tax, business license tax, value-added tax, foreign contractors without holding tax, and some other taxes namely specific sales tax, export and import duties, natural resources tax, property tax, and registration fee.
3. Other forms of investment such as participating in contractual business forms of buying stakes of an existing enterprise.
These options are available for several corporate forms such as Limited-Liability company; Joint-stock company; Partnership; Business cooperation contract; and Public-Private Partnership Contract.
Registration process
As Vietnam requires multiple layers of restriction, the verification and review procedure to form a business in Vietnam might be more complex than the US or Singapore.
-The first step is applying for licensing to establish a foreign company
-Then, foreign investors must register their investment with licensing authorities through two steps: obtain the Investment Registration Certificate (IRC) and obtain Enterprise Registration Certificate (ERC)
Required documents
Business owners should prepare the following documents:
- A request for implementation of the investment project;
- A copy of ID card,
- Passport or business certificate of registration;
- A proposal of the project's investment;
- Demand for land use,
- Explanation of technology application
Engrave the seal
After receiving IRC and ERC, the company needs to engrave the seal and apply for the company's seal specimen.
Publicize the company establishment on a national information portal
Investors are required to provide the authorities with fundamental information regarding the company's profile. Such information is essential for validations and verifications. Investors have to provide the registered name of the company, business address of the company, charter capital or investment capital of the intended company as well as the registered business lines.
Furthermore, investors are also obliged to justify the company business location by providing the following documents:
Factors to be considered in deciding the ideal location for manufacturing
When considering the best location to set up a manufacturing business, the following factors are important aspects that can signify the long-term business plan. Four factors that should be considered are infrastructure development, labor, incentives, and types of industries.
Infrastructure development
When it comes to infrastructure development, business owners can reckon whether the location is suitable for supply chain infrastructure, logistics, and access to customer markets. The location of the manufacturing business has connectivity with the global supply chain.
The business owner should also consider the labor force when choosing a location. Each region in Vietnam has different minimum wage range. Vietnam's key attraction to foreign investors is the low cost of labor. The minimum wage is ranged from US$125 to US$180 per month, varied by regions. Major cities such as Hanoi or HCMC demand higher minimum wage compared to Vinh Phuc, Phu Tho or Bac Giang. In addition, industrial workers and managers are expected to earn from $US500 to $US 180 on a monthly basis.
According to a report published by Vietnam Briefing about “Vietnam’s key regions and economic zone”, the Northern labor force also has a competitive advantage in terms of qualification. Cities in the North such as Hai Phong or Ha Noi have an abundant supply of qualified workers. As the talent pools are more focused on heavy industry and natural resources than other regions in the Central and South Vietnam.
Whereas regions in the Central such as Da Nang, Quang Nam, Quang Binh have more scared talent resources compared to the North and the South, since workers in technical fields often find greater opportunities in the other two regions, making it challenging to find the right workers in the Central.
While Ho Chi Minh City (HCMC) has an ample talent pool, the environment between employers for talent is highly competitive. As such, the Turnover rate might result in significant delays for companies that seek to initiate production.
Incentives
Preferential tax rates are also available in several industrial zones in Vietnam, which are determined on a zone-by-zone basis and can be extended to both personal and corporate rates. This enables investors to offset the higher wages and rental fees that are often found in these areas. The Vietnamese emerging market has been quietly undergoing one of the most competitive tax regimes throughout Southeast Asia, a standout feature of Vietnam's tax regime. Specifically, there are three forms of incentives that are available to operate companies:
1. Reduction or exemption of import tax on goods imported as fixed assets on raw materials
2. Application of lower rate of corporate income tax, which is currently levied at a rate of 20 percent on locally sourced profits
3. Exemption of land rents.
Notably, Land Rental Incentives are also applied depends on the scale on condition of one's project. According to the Land Law 2013, the government allows up to the whole rental period for the project that invests in especially encouraged investment sectors. Moreover, mega-projects that having total capital of at least VND 6,000 billion in especially encouraged investment sector also benefited from the exemption.
Types of industry
Foreign Investment Enterprises (FIEs) should compare if the geographic location's elements are aligned with the company's purpose and distinct features. This process requires careful weighing the advantages and disadvantages of different locations.
Options can be narrowed down by geographical concentration of industries as some regions host more enterprises from a specific industry than others do (see infographic above). Representing some of Vietnam’s main export sectors, garment and textile manufacturing are concentrated in both north and south Vietnam, while footwear and furniture manufacturing are both concentrated in south Vietnam.
The north is arguably the better choice for an enterprise importing input goods from China, while the south has the advantage of being near the largest commercial port in Vietnam. Proximity to key destinations such as airports, seaports, major cities, main highways, and borders are also important. As some regions are specialized in a specific industry than others do, the options can be narrowed down by geographical concentration of industries.
While the garment and textile manufacturing are populated in both the North and the South, footwear and furniture manufacturing are concentrated in South Vietnam. On the other hand, the North is evidently a wiser choice for firms that import goods from China as input as the region is consistently in need of machinery and capital to facilitate the heavy industry and natural resources.
In conclusion, the three most significant points to open a manufacturing business are fundamental regulations of setting up a manufacturing business, steps to set up a manufacturing business and categories to be considered to set up a manufacturing business. Vietnam is trying to become an ASEAN hub to attract more foreign investors to create more projects in Việt Nam.
Hope that the article provides you helpful insights so that you can make a wise decision when setting up a manufacturing business in Vietnam. If you need any help for incorporating a company, we're ready to help you.
If you ever wish to work in Indonesia? Or you want to hire foreign employees? If so, then you may need to acquire work permit in Indonesia. However, it is important for you to know that sometimes online information in regards to visa application in Indonesia might only be accurate at the time of writing. The Immigration Law in Indonesia is prompt to change, so it’s better for you to make sure the regulations are always up-to-date from time to time.
In this article, you will find the information about how to apply for a work permit in Indonesia. It’s based on the following work permit regulation: the Work Permit Regulation (No. 16/2015) and it’s October 2015 update (No. 35/2015), as well as the latest Presidential Regulation (No. 20/2018) for The Use of Foreign Worker.
General Specifications for Work Permit in Indonesia
Before getting into deep of the article, it’s better to clarify some of the common terminology thrown around by the expatriate community in Indonesia.
KITAS (Kartu Izin Tinggal Terbatas) - most foreign nationals in Indonesia refer to their stay permit as KITAS. This is a legacy term as foreigners no longer receive an actual card with their work permit.
Work Permit or Izin Mempekerjakan Tenaga Asing (IMTA) - until 2018, the company had to first apply for a work permit and then for the stay permit (VITAS or E-ITAS). This process is now combined.
Re-entry permit (MERP) - until 2018, you had to separately apply for the entry permit to be allowed to exit and re-enter the country. So, this is no longer required.
To get a work permit, a foreign national first has to be employed by a company registered in Indonesia. However, not all companies are allowed to hire foreign employees.
Requirements For The Company To Give Work Permits For Foreign Workers
A company is eligible for hiring foreign employees in Indonesia as long as they meet the following requirements:
Sufficient capital
The company is a PT PMA (which must have a minimum capital of at least 2.5 billion Indonesian Rupiah) or a 100% locally owned company with a capital of at least one billion Indonesian Rupiah.
Allocated Indonesian co-worker
Each foreign worker has to have an Indonesian national designated as the co-worker.
Permitted job title
Foreign nationals are not allowed to hold some positions in Indonesia.
In addition, the company must submit the Manpower Report (WLTK or Wajib Lapor Ketenagakerjaan).
Minimum Requirement For Foreigners To Be Eligible For The Work Permit
As you want to hire or want to be hired in Indonesia, there are some general requirements that you need to pay attention to. They are,
Bachelor degree or higher
If the position requires specialized education, a relevant degree (for example, in education or engineering)
A recommendation letter from the previous employer, having at least 5 years of work experience
Proof of health or life insurance for your whole stay in Indonesia
Proof that the employee has health and life insurance
Positions a Foreign National in Indonesia Can Hold
Foreign nationals can hold a work permit and carry any titles that are not restricted. However, a foreigner cannot hold positions related to Human Resources, legal, and medical industries.
Furthermore, the general requirements do not specify any age limitation.
How Long Is a Work Permit Valid for?
It is valid from 6-12 months, depending on the job position applied, and a 12-month work permit is extendable.
Local Co-Worker Requirement
Every foreign employee has to have at least one local co-worker that holds a title relevant to the foreigner’s position. The company does not need to appoint Indonesian co-worker for the following positions:
Director
Commissioner
Founder of a foundation (Anggota Pembina Yayasan)
Member of a management of a foundation (Anggota Pengurus Yayasan)
Supervisor of a foundation (Anggota Pengawas Yayasan)
Even though these positions do not require a local co-worker, they do need to be guaranteed by an Indonesian citizen who is responsible for any misconduct caused by the foreigner.
The Process of Getting a Work Permit in Indonesia
The whole process of getting a work permit in Indonesia generally takes 1 month. Let’s see the general process below!
Foreign Manpower Placement Plan (RPTKA)
An application in which to state the list of a foreign worker and the position you will be hiring.
Payment of The Employee Development Fund (DPK-TPA)
DPK-TPA is essentially a pre-paid tax to the government for hiring foreign employees. The fee is $100 per month, and needs to be paid upfront for the entire duration of the work permit. You can pay either $600 for a 6-month work permit or $1200 for a one-year work permit.
Stay Permit Notification Approval or Telex
The approval is sent to the Embassy that the foreign worker has chosen. They must exchange it to an actual stay visa at the Embassy prior to entering Indonesia.
E-ITAS or Limited Stay Permit
Limited Stay Permit (often called by foreign nationals as KITAS) will be issued as soon as the foreign worker has arrived in Indonesia, and has its biometric data record at the border or at the local Immigration Office.
Civil Registration
Registering the domicile of the foreign worker to the local administrative office.
If the employees wish to extend their work permits, they do not need to fly out of Indonesia during the process. However, it is highly advisable to start preparing for the extension process 3 months before the expiration date of your work permit.
Like many other Asian countries, Indonesia is an attractive destination for foreign professionals seeking new opportunities. Getting a work permit in the country might be a little tricky and need some time to process, especially when you meet unforeseen issues, it can be so complicated. However, we can help you with our best team. Don’t hesitate to contact us, and Viettonkin Consulting will always be assisting you!
As we are witnessing, the COVID-19 pandemic has put its impacts on every aspect of society worldwide. Economics is also a sector that has severely suffered from the outbreak, almost all of the production and services are crippled and the F&B industry is not an exception. Facing the business pressure of the pandemic, instead of choosing to give up and float, the Vietnamese F&B market witnessed many brands dare to think, dare to do, innovate, and test to survive. They choose to remain fighting, to protect their own brand and their employees. This is also a matter of Vietnamese coffee shops. This article covers how these coffee shops can survive during the crisis then we can see whether their abilities to recover are potential or not.
How are Vietnamese coffee shops influenced by the COVID-19?
Under the global pandemic, almost no industry is out of its sphere of impact. In Vietnam particularly, coffee shop business is one of the F&B industry group that has suffered a great loss due to this outbreak. The decline in the number of tourists, the limitation in the number of residents in crowded places have led to a sharp drop in revenue, while shops still have to pay very high rental costs, which are the main reasons for the big trouble of coffee shops’ owners.
According to the owner of a restaurant and a brand of coffee in District 1, this company has been in a pathetic condition in the season when domestic and international tourists both declined, of which the coffee system sometimes dropped by 50%. customer.
A lot of coffee shop shut down
Meanwhile, the Doha coffee shop at 223 Phan Xich Long, the outstanding culinary street in Ho Chi Minh City, also hangs a sign to stop operating from February 24, even though it was opened on September 9, 2019. This business admitted that the COVID-19 epidemic had an impact on reducing the number of visitors.
According to Mr.Vo Duy Phu, the director of commerce and marketing, The Coffee House, the Vietnamese coffee chain, said the COVID-19 epidemic had disrupted the system's plan to accelerate the opening of 100 restaurants in 2020. According to the plan, right after the Lunar New Year, the chain will open more points of sale, but the impact of the epidemic makes this plan must last into May and the last months of the year.
How Vietnamese coffee shops survive during the crisis?
We have no longer heard any invitations like “Cafe?” or “ See you later at the coffee”. The whole society is conducting social distancing whether it is a crowded city or a small street. Young people tend to visit cafés after a meal at the restaurants or enjoying a movie at the cinema. Thus, the closure of these establishments has indirectly impacted the coffee store chains. So, facing this challenge, the coffee shops owners must find a way to save themselves.
Change the business model
In the epidemic situation, in order to still meet the needs of customers, have revenue but still ensure the implementation of the policy of social distancing, not gathering in crowds, the “giant” coffee shops of Vietnam such as The Coffee House, Highlands Coffee, etc. has shifted to online-home delivery business model.
Highlands Coffee has just announced to halt all services at its stores, excepting take away, as of the end of March 31. During this time, the cafés will only serve for takeaway and online orders via food delivery applications.
Coffee shops change the model of working
Similarly, Starbucks has also temporarily halted serving customers at its stores in the city until the end of the month. The Coffee House has also begun offering home delivery to keep the virus from spreading.
With the F&B brands that have been strong in the delivery segment from before, such as The Coffee House, Starbucks, etc. this is the time for brands to assert the role of the platform, while promoting to make the most of the potential, enough revenue to "stand" through the pandemic.
Furthermore, under the great competition of brands, every brand must have their own measures to attract attention and actively interact with customers. This is the "golden time" for new creations, from attractive deals of brands such as mass discount, hourly discount, combo purchase, earning points, giving drinks, etc.; to new delivery methods such as fishing rods, ordering in front of the gate, ship hotpot and home services, etc.
In recent times, aiming to increase their foothold in the local market, Highlands Coffee, Starbucks, and The Coffee House have accelerated expanding their networks with 240, 49, and 145 stores across the country. While making online ordering available, their performance depended heavily on the physical stores.
Achievements after efforts
The methods of online selling with the promotion and reasonable promotion strategies have brought positive features for some brands. According to CafeF, some coffee brands in Vietnam also increased online sales during this period:
Starbucks Vietnam: Since the end of March 2020 when major cities request to close, Starbucks Vietnam's revenue from delivery has increased by 50% compared to the average of February sales.
The Coffee House: With discount throughout, orders from 50,000 or more are free shipping. Sales of online sales as of March 29, 2020 increased 30% from the previous week, as all The Coffee House shops were closed.
These remarkable achievements are the results of the creativity and flexibility in the online business methods of Vietnamese coffee brands, cafe and milk tea establishments from big to small. In a time when the disease is still unpredictable, the online selling time will still maintain an important role, even after the epidemic, this can become a long term trend caused by the specific changes in customers’ demands.
The role of retaining staff
The pandemic has caused many Vietnamese coffee shops to “reeling” to stay afloat, while many forced their employees to temporarily leave work due to the social distancing and the decline in revenue. The free time has been so long that a large number of staffs may or have to look for new jobs to meet their daily life demands, which is the other leading concern of the shops’ owners. Therefore, the question “ how to retain staffs?” needs to have its answer.
Mr. Phu Vo, Co Founding of The coffee house shared that: “Beside measures to improve the customers’ experience and maintain the online business, we still try to ensure the welfare of employees so that they can have days off but still get paid. Just like that, mutual support is stimulated so no one is left behind. ”
In short, it cannot be denied that no industry is outside the impaction of COVID-19. However, “In a time of crisis we all have the potential to morph up to a new level and do things we never thought possible”. Thus, we can completely believe that Vietnamese coffee shops still keep the business circle running despite any crisis. Hope that the pandemic will end as soon as possible for not only coffee brands but other industries could also come back to their normal status with great business development.
Acquisition and merger between companies today bring benefits to both parties, especially for those who would like to make an entry to a foreign market. One of the advantages is to create greater financial power and more influence. As a result, foreign companies incorporating financial services are researching and finding ways to incorporate in Vietnam, which can meet the demand of money circulation, meet the cash flow needs and measure all financial situations in enterprises. This article will provide you with how to incorporate a business in Vietnam in general and how to incorporate financial services in particular.
What is the incorporation of a company?
The incorporation of a company refers to the legal process that is used to form a corporate entity or a company. An incorporated company is a separate legal entity on its own, recognized by the law. These corporations can be identified with terms like ‘Inc’ or ‘Limited’ in their names. It becomes a corporate legal entity completely separate from its owners.
Why incorporate?
Everyone knows how great are benefits that a corporation brings to the owner. Furthermore, there are other reasons why the corporation proves to be an attractive vehicle for carrying on a business. Let’s examine them:
Owners are protected from personal liability from company debts and obligations.
Corporations have a reliable body of legal precedent to guide owners and managers.
Corporations are the best vehicle for eventual public companies.
Corporations can more easily raise capital through the sale of securities.
Corporations can easily transfer ownership through the transfer of securities.
Corporations can have an unlimited life.
How to incorporate a company in Vietnam?
For many foreign investors whose targets are in Vietnam, the knowledge of incorporation procedures is strictly required to subject to. In Vietnam, a business founder has to follow four main steps of procedures for business establishment and registration as follows:
Step1: Prepare information for your business profile
2. Prepare notarized copies of your ID card or passport. Notarized copies of ID card no longer than 3 months and its validity period is not more than 15 years.
3. Determine your company’s name and address of your office. The founder of the company must not name the enterprise that is identical or confusingly similar to the name of another company registered in the national enterprise registration database, except for dissolved or court entities. bankruptcy declaration (according to the provisions of Clause 2, Article 42 of the Law on Enterprises).
4. Determine the regulation of capital.
5. Determine the title of the company representative (e.g the manager or director).
6. Determine the main business lines. You need to specify whether your business needs additional conditions (legal capital, other regulations, etc).
Step 2: Conduct the incorporation phase
1. Compile the company profile
The necessary company profile includes:
Application form for business registration
Draft of Company's regulations
Shareholders and Founders list
Authenticated papers of members, legal representatives
Valid personal identification papers of authorized representatives and legal representatives
Legal capital certificate
A valid copy of the practising certificate and ID card of the person who has a practising certificate for enterprises conducting business lines that require a practising certificate.
2. Submit a company file at the provincial business registration office.
3. In case of authorization to submit, a letter of authorization is required.
4. To be granted an enterprise registration certificate after 5 days after receiving the dossier.
Step 3: Procedures for registering the entity seal
1. Take a copy of the enterprise registration certificate to an agency that has the function of carving the seal to perform the seal of a legal entity for the company.
2. The legal entity seal will be transferred to the provincial/municipal police agency for checking the registration and giving the seal to the enterprise.
3. When receiving the seal, the representative of the business brings the enterprise registration certificate (the original) and presents the ID card.
Step 4: Procedures after the business incorporation
4. Submit the notice of the application of value-added tax calculation method.
5. Conduct procedures for purchasing and ordering invoices.
6. Post or hang the invoice templates at the company headquarter.
7. Prepare all business conditions for conditional business lines.
How to incorporate financial services in Vietnam
Firstly, it must be affirmed that the process of setting up a basic financial company must base on the procedures of incorporating a business in Vietnam. However, since its business items are financial services, there are still some conditions required for the founders of the organization. With the first step of determining the type of your business, you should take a look at these five following types of finance companies:
Types of financial services
1. State-owned finance company: a finance company with state capital investment, establishment, and organization of business management.
2. Joint-stock finance company: a finance company being jointly contributed, established and organized by a business organization or individuals.
3. Finance company affiliated to credit institutions: a finance company established by a credit institution with its own capital and owner as prescribed by law, independent accounting and legal entity status.
4. Joint Venture finance company: a finance company established by contributing capital between Vietnam and foreign parties on the basis of a joint venture contract.
5. 100% foreign-owned finance company: a finance company established with a capital of one or more foreign credit institutions under the provisions of Vietnamese law.
Basically, procedures of incorporating a finance company bases on the general rules of incorporating a company. Nevertheless, there are compulsory conditions are required by the Vietnamese government to ensure the performance of the strict management of this business type.
Conditions for founders who are foreign credit organizations
1. Having total assets of more than US $ 10 billion at the end of the year prior to the time of filing, unless otherwise provided for by the bilateral investment agreement between Vietnam and the home country.
2. Business activities are healthy and safe; profitable in the year immediately preceding the year of proposing the establishment of financial company
3. In case a foreign credit institution is a bank, in addition to the above conditions, it must be a reputable bank, ranked by the international rating organization from average and stable level upwards, with bad debt ratio less than 3%.
For Vietnamese credit organizations
1. Maintain prudential ratios in operation as prescribed by law after contributing capital to financial companies;
3. Not breaching the prudential regulations in operation according to the regulations of the State Bank of Vietnam for 6 consecutive months before the time of requesting the establishment of a financial company;
4. Business activities are healthy and safe; profitable in the year immediately preceding the year of proposing the establishment of a financial company.
In conclusion, financial companies are making great contributions to the economy with the potential to provide flexible financial services that meet the growing demands of the economy. Therefore, the potential of establishment and development of these businesses is large, but it comes with the trouble if not following the process properly. It is believed that setting up your financial company will be smooth if you pay attention to this article.
E-commerce is one of the top 5 trends in Vietnam in 2020. E-commerce has put it on the map thanks to the application of advanced technology in trading products between customers and businesses. 2020 is a year that Vietnamese e-commerce is predicted to boom and attract more foreign investors. The article will help you dig deeper into e-commerce in Vietnam.
What is e-commerce?
Before analyzing any concept, it is essential to know the definition of what we are studying. So what is e-commerce? E-commerce, in other words, electronic commerce is a form of transaction that buyers and sellers exchange goods using the Internet. E-commerce is not only limited to selling physical products online, but it also refers to commercial transactions made through the Internet. There are four types of e-commerce models: business to business (B2B), business to customer (B2C), customer to customer (C2C), customer to business (C2B). Based on four e-commerce models, a variety of transaction forms between business and customers are popular including retail, wholesale, dropshipping, crowdfunding, subscription, physical products, and services. - Retail: selling a product to a consumer without intermediaries - Wholesale: selling a product in a bulk to retailers - Dropshipping: selling a product and shipping it to a customer via the third party - Crowdfunding: collecting money from consumers in advance and using that money to raise the startup capital - Subscription: the automatic recurring purchase of a product or service until the subscriber cancels - Physical products: tangible products that need to be stored - Digital products: downloadable digital goods, templates and courses that must be purchased for consumption to use - Services: a set of skills provided to exchange the compensation You have been provided background knowledge about e-commerce and the next will help you know about e-commerce status in Vietnam.
E-commerce status in Vietnam
According to a summary report of the Vietnamese e-commerce market in 2019, Shopee VN leads the highest monthly traffic with 33.6 million, thegioididong and Sendo are the top three brands leading the monthly traffic. The highest rank in the number of traffic belongs to Shopee VN with 33.6 million visitors. Shopee VN had done a good job in hitting customers’ attention by introducing Shopee Live in March featured with Cristiano Ronaldo which was supported financially by SEA Limited. By the first three months of 2020, Shoppe has launched Shopee Feed with great success with a view to providing social connections among buyers, sellers, and friends. Meanwhile, Sendo tried their best to attract more new customers. This e-commerce platform’s new users had increased by 24% in the Q1 and Q2 of 2019. Besides, Sendo ranked the second position nationwide regarding new downloads. In 2019, Tiki released a new Livestream feature called TikiLive and tried to improve their warehousing and fast delivery capacity, which got a positive result of positioning the second place of the popularity on social media. On the other hand, Lazada came up with an idea of integrating the platform with entertainment activities namely Lazada Super Party, Guess It game show, and the Lazada Music Festival. Thanks to these activities on mobile phones, Lazada ranked 2nd in terms of app users, yet ranked 5th in the website traffic recording 23.8 million visitors per month. According to iPrice’s research, four most-used e-commerce apps are Shopee, Lazada, Tiki and Sendo. In spite of the participation of a lot of foreign platforms like Aliexpress, SHEIN, Wish, the order still stayed the same. From the review, it is pointed out that Vietnamese customers are loyal to their favorite e-commerce platform. They will go to the website to look for their items. Based on the achievements of giant Vietnamese e-commerce platforms, consumer behavior towards online shopping has changed. Vietnamese buyers have preferred online shopping and been more trusted in the quality of products selling online.
Prediction about e-commerce in Vietnam
2020 is believed to be a dynamic year for Vietnam’s e-commerce. According to the iPrice Group, three predictions are expected for e-commerce heading forward.
1. Focusing more on profitability instead of growth
Obviously, investors are more careful about investing in an area that produces a lot of profits and has sustainability in the future. This creates a trend in boosting profits among a variety of companies. Teddy Oetomo, chief strategy officer of Indonesia’s unicorn Bukalapak, shared that “Our focus is no longer growth, but to build a sustainable company.” Vietnam also follows the tendency. Two Vietnam’s e-commerce companies have been trying to focus on more profitable business sectors including Lotte.vn and Adayroi by closing online marketplaces. Lotte.vn has closed its website to change the company’s plan of retail strategy and Adayroi also shut down the website with a view to shifting to a new retail model. Giant Vietnamese e-commerce players now are relying on foreign investors’ capital. According to the iPrice Group, the four biggest e-commerce companies consisting of Shopee, Tiki, Lazada, and Sendo suffered a huge loss in 2018 then continued to raise money from oversea investors. These four companies have pointed out their plan of generating more profits in 2020 rather than emphasizing on the website traffic or merely the number of users.
2. Putting effort in infrastructure
According to a new survey conducted by Parcel Perform and iPrice Group, users are still not satisfied with their e-commerce delivery service. Researching on more than 80,000 e-commerce users across Southeast Asian countries, the study has found key factors improving customer satisfaction. Faster parcel delivery will lead to higher customer satisfaction ratings. Besides, communicating proactively with buyers on expected delivery time and meeting the expectation will easily facilitate e-commerce platforms to gain 5-star ratings. Because around 90% of negative feedback stems from transit time and late delivery, it is essential for e-commerce companies to address this pain point. Plus, in the study’s findings, Vietnam is booming in e-commerce with the highest delivery ratings in Southeast Asia, which signals a positive outlook for the development of e-commerce in Vietnam. Despite the highest customer happiness in delivery service, Vietnamese e-commerce giants should continue to improve the speed of delivery in order to compete with other countries within the region.
3. Opportunities for SMEs e-commerce companies
Not only big leading e-commerce players but also new e-commerce comers are helping e-commerce service in Vietnam become more abundant and competitive. The most notable startup that is worth mentioning is Lozi. The Vietnamese consumer-to-consumer company has ten branch companies providing services using the Internet to users. Lozi is now setting its eyes to become a one-stop solution for Vietnamese customers within one-hour delivery needs. Other than Lozi, there are many other Vietnamese startups in the e-commerce field. With the entry of newcomers, online payments, logistics, and customer relationship management tools are more accessible that fit lots of organizations’ demands. In addition, since the Coronavirus outbreak, customers prefer online shopping and online learning, hence e-commerce services and items have more chances to advance the quality of provided products.
You can also find further information about the Vietnam technology guideline in 2020. Generally, 2020 is a year leading and newbies in Vietnamese e-commerce continue to grow and achieve new achievements. Opportunities and challenges can be clearly seen from owners’ perspectives, however, Vietnam is still considered as a potential market. If you have the intention of investing in Vietnam, let’s consider the e-commerce area.
About Us
Founded in 2009, Viettonkin Consulting is a multi-disciplinary group of consulting firms headquartered in Hanoi, Vietnam with offices in Ho Chi Minh City, Jakarta, Bangkok, Singapore, and Hong Kong and a strong presence through strategic alliances throughout Southeast Asia. Our firm’s guiding mission is aimed towards facilitating intra-ASEAN investments and connecting investors in Southeast Asia with the rest of the world, thus promoting international business relationships and strengthening inter-nation connections.
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