A key word we often hear in the business world is stability. The vast majority of businesses thrive in a stable, safe and consistent economy, where they know the rules and what is happening next. The results of our poll suggest uncertainty rather than stability.
With 82% of respondents saying they are either confident or very confident the economy will improve in the years to come, the concerns are about the underlying fundamentals of doing business in Vietnam.
Property: Boom and Bust?
Any resident of Saigon or Hanoi will notice the huge developments in parts of their respective cities and 40,000 condominiums are being launched in 2017 and 2018 in Saigon alone. Such is the pace of growth in terms of supply, there are some genuine concerns of a bubble. As one respondent simply says: “So many properties going up. It’ll crash soon, surely.”
There is also confusion about the laws of property ownership, with one suggesting “sketchy laws make this kind of investment tricky,” together with the fact the government owns 100% of the land means just 28% of respondents would feel confident or very confident investing in property. The difference becomes more stark when the results are broken down into Vietnamese and foreigners. 46% of the Vietnamese who replied feel confident or very confident in investing in property in Vietnam.
Business Partners: Shared Culture or Local Knowledge
In the survey we asked two separate questions on whether respondents would start a business with a Vietnamese partner or a non-Vietnamese partner. The results were fairly similar for both questions. 56% of those who replied said they would not feel confident about starting a business with a non-Vietnamese partner, while 53% would not be confident about doing so with a Vietnamese partner.
The underlying issue seems to be one of trust and competence rather than nationality, with one suggesting “trust would be the greatest obstacle.” There are mentions of the need for local knowledge, too, with another commenting, “things are definitely harder for you if you do not have a Vietnamese partner.” One of the interesting stats is that Americans and New Zealanders are the only groups who were more confident than not about working with a non-Vietnamese partner.
Banking With a Local Bank: Just As Frustrating As Anywhere
Working with banks around the world is often fraught with complicated terms and conditions, however, the majority of respondents (56%) said they were confident in dealing with a local bank. “I bank with Vietcombank,” says one participant “and have no problems with local banking or transferring money back home.”
There are tales of caution though, with some suggesting “banking laws are beyond frustrating” and mixed communication in terms of regulations and practice.
Investing In a Franchise: Unknown Territory
Almost mirroring the results on investing in property, 70% of those who replied would have no or very little confidence in investing in a franchise in Vietnam. The Vietnamese were more enthusiastic about the prospect of franchise investment than foreigners, with 46% saying they would be confident in doing so.
The underlying cause of the lack of confidence among foreigners is the lack of understanding or knowledge on how franchises can operate in Vietnam. “Without an IRS or SEC,” says one respondent, “the health of business financials are impossible to judge for accuracy.”
Conclusion: Doing Business In Vietnam Is Complicated
The overall sense is that the Vietnamese economy will continue to grow and improve, but there is the inescapable feeling of doubt over certain aspects of the economic picture, particularly with property and the speculation of a bubble in the offing. As one person says simply;
“Does anyone really know the true economic situation of Vietnam?”
We asked people how confident they were in the following areas of business in Vietnam:
1) Investing in property
2) Starting a business with a non-Vietnamese partner
3) Starting a business with a Vietnamese business partner
4) Banking with a local bank
5) Investing in a franchise
6) Improvement in the economy in the near future
“[Banking] regulations are constantly changing, and decided upon without prior notice. International banks are slowly gearing away from Vietnam because of these.”
[On setting up a business with a Vietnamese partner] “Always draw up a contract with a lawyer or para-legal and sign and notarise it. It’s not that difficult and will save you headaches in the future.”
“7% for the next 30 years is not likely, but the rise of the middle class is happening right here, right now.”
“[The economy is) only going up… Well, until the housing market crashes.”
— Three quarters of respondents are not confident in investing in property
— 4 in 10 people say they would be confident of doing business with a non-Vietnamese partner
— However, almost one half of respondents would be confident doing business with a Vietnamese partner
— Less than 1 in 5 people are not confident in the Vietnamese economy in the future
— 30% of people say they’d be confident enough to invest in a franchise in Vietnam
Photo by Julie Vola
To read the other articles in this series, click on the following links: