Country Risk Analysis: VIETNAM

Group members:
Arun Manohar & Viraj Chavan
 About Vietnam
• Its Population is over 86 million.
• Language spoken is vietanamese most of the
vocabulary is borrowed from chinese.
• Its neighboring countries are China, Laos, Cambodia.
• The Socialist Republic of Vietnam is a single-party
state
• President of Vietnam is Nguyễn Minh Triết
• Major cities are Hanoi, Ho chi minh, dalat, Nha
tarang and Hue.
• Its capital is Hanoi
 NATURE OF BUSSINESS
• IT is the fastest growing sector
• Young population is more
• Sales record of 685$ in 2004 and 850$ in 2005
and expected ahead till 1050$ in 2011.
• Growth rate of IT is 25% annualy
PEST FACTORS
 POLITICAL FACTORS
• Vietnam is a Single Party Communist State.
• It has higher government control and less
autonomy for the organization wanting to
enter the Vietnamese market
• It is advisable to form good relations with the
local government and negotiate favorable
terms with them
 ECONOMICAL FACTORS
• Vietnam is a developing economy.
• It is best to use a price leadership strategy
rather than rely on product differentiation
 SOCIO-CULTURAL FACTORS
• There are language barriers
• It is also predominantly Buddhist (85% of the
population).
 TECHNOLOGY FACTORS
• Infrastructure in Vietnam is adequate.
• There are 17 civil airports and pipelines to
transport liquids such as petroleum.
SWOT ANALYSIS
 STRENGTHS
• It has a large, skilled and low cost work force.
• Its proximity to China and South East Asia and
has good sea links which makes it a good base
for foreign companies.
 WEAKNESS
• Its infrastructure is still weak.
• High tax laws
• A failure by the authorities to boost skills
levels
 OPPORTUNITIES

• It is increasingly attracting investment from

key Asian economies, such as Japan, South
Korea and Taiwan.
• International agencies/media owners setting up
offices in Vietnam.
 THREATS
• MONOPOLY
• Ongoing trade disputes with the US, and the
general threat of American protectionism.
• It remains one of the world's most corrupt
countries
 PROS OF COMPANY FORMATION
• There are no minimum capital requirements
with Vietnam company formation
•  Cheap labour
• Young population.
• A Vietnam Joint Venture is an ideal way for
foreign investors to gain ready access to local
markets.
• Proximity to China
 CONS OF COMPANY FORMATION
•  Vietnam company formation is complex
• Poor infrastructure.
• Corruption.
• Red tape
• Corruption.
 Political Risk
• Political risk is very important
• Currency control is very different from other
countries
• Labor law is flexible
• Cost of labor is cheap
• Regulatory restrictions are not as strict as
other countries
 Currency Fluctuations
• 1.00 VND=0.0000512821 USD
 Repatriation Of Profits
• Accumulated loss position
• After the tax obligations for the financial year
• Must comply with other rules of foreign
currencies and trade policies
• More than 1100 foreign invested companies
had hidden profits of VND 6trillion
 FDI RULES
• VIETNAM passed the 1st law of foreign
investment on 29th december 1987 and has
amended it several times.
• Different types of FDI – 100% foreign owned
firms, joint ventures, business cooperation
contracts, build operate transfers.
• FDI is concentrated to some key industrial
areas in the south and north of Vietnam. Eg:
ho chin min city, dong nai etc
 Latest FDI News
By the end of August 2010, of which direct foreign investment
(FDI) registered in Vietnam reached nearly 10.8 billion dollars.

Vietnam ranked third for investment attraction among Asian nations in

the 2007-2009 period, after China and India.
 Corporate tax
• Taxable income is subject to rate of 25%
• Corporate tax is between 32% to 50%
• 0% for exported goods 5% for essential goods
• 10% for other goods
• Special tax are levied on cigarettes, spirits,
beer and automobile of less than 24seater
THANK YOU