There are several factors that highlight the fact that Vietnam has come a long way in becoming a suitable country for foreign investments. Factors such as an expanding gross domestic product, i.e. GDP, the massive changes in the infrastructure of the country, as well as the multiple interests taken up by foreign firms and investors into eyeing Vietnam as their next business expansion country, all indicate that Vietnam is ready for more businesses from their foreign counterparts.
However, despite all that, there still lie a lot of problems of starting a business and also problems of living in Vietnam. These problems will provide severe headaches to foreign investors and can delay the start of their operations. While they can be solved eventually, the help of a local company or locals for that matter is likely to speed things up. Listed below are some of the top problems one is going to face when starting a business in Vietnam
Getting Started– There is a saying that no matter how big a task is, once you get started, the rest of it happens automatically. However, in Vietnam, getting started on the business is a big task itself. You will be required by law to register your business before you can start operations. While that is not a problem, it’s the process that kills all your time and patience. There are literally 10 different processes in Vietnam when starting a business, which makes starting a business in Vietnam the most complex in the entire world. Most of the time, foreign investors have no clue regarding these ten complex processes as they are not in practice in many parts of the world. The business registration process is followed up by making company seals and then an announcement of your business in the Business Portal all of which can be very strenuous. There have been quite a few times when investors have ended up backing out of starting their businesses just for these reasons.
Construction Permits– If you are planning on investing in real estate or construction business then the process to obtain a permit gets even longer. As per the law, all business types in Vietnam require a business license which is fine. However, construction permits take around 110 days, and that also after you have followed 11 different complex procedures. This basically means you will be literally running around from one government department to another with all your paperwork for over three months just to get a permit. The whole process involves an inspection done by the Department of Construction and municipality before anything can be moved further. So if the Department is busy or has already other projects in hand, then the inspection can be further delayed. Alongside that, you will need to get certificates from the Firefighters Prevention Department and the Department of Construction as well as the Department of Natural Resources and Environment. Yes, it’s a very lengthy process to obtain that permit.
Getting the power lines– You cannot start a business without the proper electricity running through your building, factory or office. It’s one of those basic needs without which your whole life and all other activities would not function at all. And to make matters worse, getting the electricity running in Vietnam is one of the most difficult tasks. It takes almost forever to get that power lines connected. On average it will take 115 days to get the proper connection which is a very long time in the business period. Time is not the only factor here, the cost of getting electricity is also high here. It takes a significant amount of your cost of production to get the initial power lines. Once again, an inspection is done by the local power corporation before they can approve the power connection. The Traffic and Transport Department along with the Firefighters Prevention Department will also be doing an inspection before you can finally get the electricity.
Paying taxes– Taxation is one of the most important factors that can decide if it is worth investing in a country. In Vietnam, the tax rates and policies are quite unfavorable. In fact, there is a huge 32 percent tax imposed on corporations. Compared to Hong Kong where the corporate tax rate goes as high as only 16 percent, Vietnam does become a troublesome country to conduct your business in. It is not just the tax rate which is high; the whole filing your taxes is a very complicated policy as well. It a lengthy process where each company can take up to an average of 872 hours to complete filing for taxes. Not only does it take a lot of effort and patience to complete it properly, but it also costs the business a lot of business hours which otherwise could have been used to become productive elsewhere. As it stands, taxation is one of the most problematic things in the entire business process in Vietnam.