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In 2013, the bilateral trade of both countries reached 970 million USD, an increase of
13.3% in comparison to the previous year and placing it as the seventh largest investor
in Vietnam. Taiwanese FDI and ODA began before Vietnam’s accession to WTO in 2007.
Since the economic downturn in 2008/2009, there has been a year-by-year increase in
the number of Taiwanese businesses entering the Vietnamese market. This is assisted by
the cultural ties between the two countries (including the large population of
Vietnamese people living in Taiwan reaching over 400,000).
The year-by-year increase is expected to continue well into the future as economic ties
between the two countries strengthen.
We hope this profile will give you some insight into why Taiwanese businesses are keen
on expanding their operations in Vietnam and how your business will benefit from also
entering this country of opportunities.
Population
Vietnam is home to approximately 90 million people and is one of Asia’s most densely
populated countries. Over 70% of the population resides in rural areas, which rely
primarily on agricultural production.
Vietnam has a young population, with working-age adults representing over 50% of the
population. The younger generation is increasingly aspiring to achieve affluent lifestyles.
And with the introduction of jobs and an increase in wages, young people have more
disposable income, creating an ideal market for new products and services.
The Government’s efforts to achieve monetary stability have also been successful. The
exchange rate of Vietnam’s official currency, the Vietnamese Dong (VND), has remained
steady over the course of the past couple of years.
Investors can take comfort in that the days of instability in Vietnam’s economy have
passed. A testament to the country’s positive financial outlook is the year-by-year
increase in the Vietnam Stock Market (VN-Index) and the Government’s continued
efforts to tackle its number of bad debts.
Vietnam’s large supply of low wage workers and favorable tax incentives for the
industry have attracted a growing number of foreign companies assembling or
manufacturing electronics in the country. In 2013, computer and consumer electronics
products and components dominated Vietnam’s total exports.
Textiles
The country also boasts a strong textiles industry and the demand for these products is
expected to increase following entrance into the TPP Agreement. Vietnam’s
liberalization of business lines in this sector has led to unprecedented investor interest
to satisfy the growing demand from overseas markets. Growth is expected to jump from
12-13% to 15-20%, reaching 20 billion USD in 2017 and projected to surge to 50 billion
USD by 2025.
Agriculture
With over 70% of the population living in rural areas, exports in agriculture remain one
of Vietnam’s major contributors of GDP. The country’s tropical climate and unique
geographical location have made it ideal for producing certain crops. Today, Vietnam is
Banking
While the Vietnamese banking industry has traditionally been restrictive against
prospective foreign stakeholders, the Government has recently passed new regulations
that will allow investors to acquire a larger stake in the country’s national banks. The
loosening of these restrictions is expected to drive further interest in this industry as
large infusions of capital will be needed to upgrade the systems, operations and
branches of the current commercial and retail banking system.
Logistics
The growth potential of Vietnam’s logistics industry has been expanding as a result of
the country’s increasing export turnover. Foreign interest in this industry has been
supported by recent figures provided by the Deputy Minister for Transport, who cited
that local logistics providers are only able to handle 20% of market demand (with the
remaining 80% being handled by foreign companies).
Tourism
For services, Vietnam’s tourism industry has attracted some of the largest FDI
commitments into the country. In 2012, Vietnam welcomed over 7 million visitors.
These figures, which are growing, make tourism a key growth industry driven by strong
global and domestic demand.
Opportunities
While challenges remain in the country’s regulatory framework, Vietnam remains an
attractive destination for foreign investment – not least because of the Government’s
efforts to open its market to investors.
Today, almost all investment sectors in the country are open to foreign investors (many
as a result of the WTO commitments) and the rollout of further market openings is
expected to take place within the next 1-2 years. On the agenda is also Vietnam’s long
awaited entrance into the Trans-Pacific Partnership Agreement (TPP), the conclusion of
which is expected to considerably drive demand for commodities from the country.
It is, therefore, no surprise that in the 2014 ASEAN Business Outlook Survey by the U.S.
Chamber of Commerce, Vietnam was ranked as the second most popular ASEAN
destination for investment (after Indonesia). As a positive outlook, 85% of survey
respondents in Vietnam further expected profits to increase in 2014.
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In 2007, Vietnam acceded to the WTO, which expanded foreign investors’ access to
Vietnamese markets. Vietnam’s WTO commitments have drastically altered the
investment environment by largely superseding the protective legislation which was
one of the greatest challenges to doing business in Vietnam.
However, there has been a proposal to amend the current Law on Enterprises, which is
expected to transform Vietnam into a more investment-friendly environment for
investors. In practice, foreign investors in Vietnam are often required to obtain HS codes
and investment licenses before commencing their business activities. The proposed
amendments will remove these hurdles; instead, foreign investors will only be required
to obtain a Business Registration Certificate in the same manner as Vietnamese
companies. Moreover, the abolition of HS codes will allow businesses to engage in any
business activities (other than those otherwise specifically prohibited such as activities
in weaponry and drugs).
Restrictions
FDI approval for special services, such as banking, insurance, finance, and securities, will
also be subject to higher scrutiny by the authorities, and satisfaction of more stringent
conditions may be needed
Taxation
There is a double tax avoidance agreement in force between Vietnam and Taiwan, which
allows tax paid in one of these countries to be offset against taxes payable in the other.
Companies are generally subject to the corporate tax rate of 22%, which is applied from
January 1st, 2014 until December 31st, 2015. From January 1st, 2016 onwards, this tax
rate will be lowered to 20%.
Investors may also be able to enjoy preferential tax rates (or even tax exemptions) if
they satisfy some of the range of eligibility requirements set out under Vietnamese law
(e.g., by operating projects in encouraged sectors).
However, Vietnamese laws are sometimes vague, ambiguous and inconsistent. This may,
at times, lead to inconsistent applications of the law by the authorities. For this reason,
we advise prospective investors to consult with the relevant authorities prior to
carrying out their investment projects if any regulatory ambiguity or inconsistency
arises.
For more information on Vietnam’s legal landscape pertaining to FDI, please refer to the
2014 IFLR Report by Bui Ngoc Hong, Do Huy and Nguyen Xuan Thuy at Appendix 3.
1959, Taiwan sent an agricultural technical mission to Saigon Vietnam. This marked the
first record of international aid from Taiwan.
After 1990, Taiwan began to provide support in not only agriculture but also technology
and engineering. Examples of such ODA work by Taiwan are highway projects, re-
lending programs for small and medium enterprises and, most recently, medical support
and technical support.
Since 2008, Vietnam has remained the third biggest beneficiary of FDI from Taiwan.
Key Agreements
1. Double Taxation Avoidance Agreement - April 6th, 1998
The double taxation avoidance agreement in force between Vietnam and Taiwan allows
tax paid in one of these countries to be offset against taxes payable in the other.
Our Team
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• M&A • Antitrust/ Competition • Foreign Investment • Tax
• M&A
Dr. Tuan Nguyen Dr. Vinh Nguyen Mr. Binh Tran Mr. Su Tran
Practice areas Practice areas Practice areas Practice areas
• Antitrust/ Competition • Dispute Resolution • Real Estate/ Infrastructure • Dispute Resolution
• Bankruptcy • Employment & Benefits • Dispute Resolution • Real Estate/
• Employment & Benefits • Tax • Employment & Benefits Infrastructure
• M&A • Banking & Finance
(i) Corporate Group: Our highly-regarded corporate team regularly handle M&A
deals, advise on complicated business licenses, guide investors with their inbound and
outbound investments, and navigate regulatory compliance issues (including in matters
of competition, labor and taxation) to deliver commercially-practical solutions to our
clients.
(iii) Banking and Finance Group: Our banking and finance team has been at the
forefront of millions of dollars’ worth of financial transactions for large financial
institutions, funds, and private companies.
(v) Real Estate and Infrastructure Group: Our real estate and infrastructure team
has been behind some of Vietnam’s largest development projects.
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Taiwanese businesses will expand investment activities and continue with projects in
Viet Nam, said Chairwoman of the Council of the Taiwanese Chambers of Commerce to
Viet Nam Liu Mei Teh.
Ms. Liu Mei Teh was received by PM Nguyen Tan Dung on June 5 on sidelines of the mid-
term Viet Nam Business Forum 2014.
The PM told his guest that Taiwanese businesses are successful in Viet Nam, making
practical benefits for both sides.
He referred to China’s illegal deployment of its oil rig Haiyang Shiyou - 981 in Viet
Nam’s exclusive economic zone and continental shelf, which has led to spontaneous
demonstrations in some provinces. Some extremists taking advantage of the events
violated law and destroyed property and estates of some foreign businesses, including
Taiwanese ones.
The Government promptly directed relevant forces to deal with the issue and set up
working groups to support each business and help them re-operate, he added.
Ms. Liu Mei Teh hailed the quick response together with synchronous measures taken
by the PM and relevant ministries and localities to stabilize the situation, ensure
security and safety and create the most possible conditions for Taiwanese businesses’
operation.
She suggested the Government further support damaged businesses, especially tax
policy.
She expressed thanks to the Government’s assistance, saying it will help foreign
businesses, including Taiwanese ones, operate productively in the future.
Tai Yuen Company Ltd, an affiliate of the Yunlon Group (Taiwan), will invest US$150
million in the construction of a textile plant in the northern province of Ha Nam.
Chi Wei Kung, General Director of Tai Yuen, announced the plan at a working session
attended by provincial officials on Monday.
The director said the plant will cover about 24ha in Dong Van II Industrial Zone, Duy
Tien District, and will employ about 500 local workers. Construction will begin in
August and is expected to be completed within a year. — VNS
Taiwan has become Vietnam’s fifth largest trading partner, according to the most recent
press release of the Ministry of Trade and Industry (MoIT)’s Asia-Pacific Market
Department.
However, on the downside, the significantly lower import of Vietnamese goods into the
Taiwanese market, which is ranked 16th among Vietnam’s biggest importers, results in
an imbalance in trade turnover.
Over the past two decades, Vietnam’s Taiwanese exports included telephones and spare
parts, garments and textiles, agro-forestry-fishery products, machines, footwear,
ceramics, computers, and electronics.
The MoIT release states that with a total population of 23 million and a US$474 billion
GDP, Taiwan enjoyed an annual economic growth rate of 4.8%.
Currently there are more than 200,000 Vietnamese people living in Taiwan and that will
help promote made-in-Vietnam products in the Taiwanese market.
To penetrate the Taiwanese market, the MoIT says, local exporters should pay due
attention to ensuring food hygiene and safety, increasing product quality, and grasping
up-to-date information on tariff and non-tariff policies.
The country’s export earnings from the Taiwanese market were estimated at US$1.84
billion in 2011 and US$2.081 billion in 2012.
Hanoi Office
Unit 08A, Level 2, International Centre
17 Ngo Quyen Street, Hoan Kiem District
Hanoi, VIETNAM
Tel: +84 4 3824 8522
Fax: +84 4 3824 8580
Mr. Huy Do
Partner
huy.do@LNTpartners.com
www.LNTpartners.com
28 Taiwan Investments Profile in Vietnam