From Dubai - the Holy Land of Global Trade to Singapore - "Heaven" of Startup, what is the reason why Vietnamese businesses do not want to stay home? This article will reveal a panoramic picture of the overseas investment of Vietnamese enterprises, and analyze the motivation and the consequences around this trend.
The inevitable trend to maintain competitive advantage
In the context of domestic production and processing is facing many challenges, especially the lack of competition due to limitations on local raw materials and increasing labor costs. Some Vietnamese enterprises have actively seek opportunities in countries with more competitive advantages, despite geographical distance and potential difficulties of this trend. Particularly clear in the processing of agricultural products, typically export processing companies for export. Typically, Long Son Company is a large Vietnam cashew processing enterprise investing in building a factory in Ivory Coast.
The project worth millions of US dollars has been implemented last year and is expected to go into operation in the coming months. This is one of the few Vietnamese businesses who dare to invest in a remote country in the black continent to develop processing and production activities. Mr. Vu Thai Son, General Director of Long Son Company said that "his business activities in particular and cashew businesses in general in the past 3 years have faced many difficulties, even losses caused by causes. It is a shortage of raw materials, forcing businesses to import about 75 to 80% of raw materials for processing. Then continue to compete to sell products at low prices to recover capital quickly and limit financial capacity. "
This situation of buying paintings makes Vietnamese exporting businesses eliminate each other by themselves to create opportunities for importers to squeeze prices, realize these disadvantages Long Son Company decided to invest in the factory in Ivory Coast. The country provides great raw materials to Vietnam to increase competitive advantage. According to Mr. Son Vietnam, currently leading the world in export of cashew and owning advanced cashew processing technology, even if African countries are promoting their technology processing activities, they have not been able to compare. equal to Vietnam.
Therefore, the factory investment and processing in the raw material area will bring out the advantage of superior paintings to the company compared to the import of raw materials to Vietnam for processing and export. This trend is also recorded in African countries, the business representative of a Nigerian company said that the company has imported production lines from Vietnam to process cashews and now has a complete product. Exported to Europe with cheaper prices than products from Vietnam. Although the number of similar factories in Africa is not much, the trend of expanding production in raw material areas is increasing due to the cheaper price advantage and lower shipping costs.
The textile industry, which is the strength of Vietnamese enterprises for many years, is also facing the risk of losing the advantage of cheap labor. To maintain the competitiveness of some businesses have sought to expand production abroad. Typically, Song Hong Garment Joint Stock Company at the Annual General Meeting of Shareholders recently announced the investment plan to Egypt, the goal of the Red River sewing is to take advantage of cheap labor and policies. Egyptian export tax exemption. The Board of Directors of Red River sewing said that the investment in Egypt will help the company reduce significant costs, thereby increasing the competitive advantage in the market.
Specifically, labor costs in Egypt are now much lower than Vietnam. In addition, Egyptian Free Trade Agreements allow goods produced in this country to be exempted from 100% taxes when exporting to the US, and the shipping time to Europe and the US is also shorter. Significantly compared to originating from Vietnam. If this plan is realized in the Red River sewing, it will become one of the few Vietnamese textile enterprises backwards, especially in a remote country like Egypt. In short, the search and investment in countries with a more competitive advantage is becoming an weak trend for Vietnamese businesses in the context of increasingly deeper international economic integration. This trend not only helps businesses maintain a competitive advantage but also contributes to enhancing Vietnam's position in the international arena. The fact that Vietnamese businesses investing abroad is not a new story.
In recent years, most businesses when investing in a country or region have often focused on exploiting the market right in the country itself. However, the investment trend of Vietnamese enterprises is showing the expansion into remote countries instead of just focusing on exploiting the market on -site, these businesses are taking advantage of the countries of its ownership. Raw materials, low labor costs to increase competitive advantage for its production and export activities.
Setting up a foreign company to find an advantage
The trend of overseas investment of Vietnamese enterprises is increasingly clear, especially in the Middle East, where it is considered to be picky investment. According to Mr. Mohammed Ali Rashed Lootah, President of Dubai Dubai Chambers International Chamber of Commerce Chamber, 10 years ago, only 14 Vietnamese businesses registered as a member of Dubai Chambers. By July 2023, this figure increased to 89 businesses, especially since the Dubai Chambers office was opened in July last year the number of Vietnamese enterprises entering the Dubai market increased rapidly.
By the first quarter of 2024, there were 147 Vietnamese businesses registered as a member of Dubai Chambers and received benefits from the comprehensive business support services not only shown in the number of businesses. But also in the scope of practice increasingly diverse. Currently, Vietnamese businesses trading in Dubai operate in areas such as product processing, coffee, apparel, finance and software. The expansion of business in Dubai not only helps Vietnamese businesses exploit the on -site market but also the door reaching the world.
Ms. Le Hoang Diep Thao CEO of Trung Nguyen International King Coffee shares experiences from opening a trade promotion representative office in Dubai. Previously, Dubai was a very good gate to the world of businesses from 198 countries to be exempted from taxes and supported by the Government. Mr. Salem Al Shamsi Global Vice President Dubai Chambers also agreed on business in Dubai to create a great advantage for businesses. Thanks to the global connection and is a country with tax incentives. In addition to seeking opportunities in potential markets such as Dubai, some Vietnamese startup businesses decided to go abroad to open more companies or start a business by establishing a legal entity abroad due to the realization of the main notice. The domestic tax book is less competitive and the legal framework is incomplete.
The wave of establishment of legal entities abroad accounts for the majority of startups in e -commerce technology. According to a startup, the establishment of a company in Singapore is very simple to establish in this country when a foreign enterprise takes only two days and a minimum of 1 US dollar to have a license. Dynamic with many preferential policies such as simple company opening procedures, tax exemption and reduction in the first years, supporting foreign businesses to open a company at the local startup ecosystem, complete the opportunity to call capital and Reaching out to the world easier. Singapore is becoming a stop for foreign starups including young Vietnamese in Vietnam.
Many startups in one way or another is establishing a company in Singapore but the key team is still in Vietnam. In fact, there are still some industries that have not been open to foreign investors or limit the ownership of the policy lag, causing some startups to leave Vietnam. Startups say they have to go to another country like Singapore to register for a business to receive foreign investment. The less competitive tax policy also caused Vietnamese businesses to circumvent the law by opening more companies abroad. Recently, VCCI Vietnam Trade and Industry Federation reflects many Vietnamese enterprises to establish more abroad companies to provide services to customers to reduce tax obligations.
Specifically, when commenting on the amended VAT Value -added law, VCCI said that according to the current regulations, export and business services on the internet producing digital content, applications for electronics enjoyed VAT of 0% . However, many businesses say they still have 10% tax rate due to unclearly delineated between domestic consumption and export services. According to VCCI, businesses have provided a lot of information authorities such as data of intermediary platforms Google, Apple, IP, users paying an email contract even with a unit forced to separate the product. Two versions for domestic and foreign markets but still not accepted by the tax authorities. Many individuals and individuals set up additional companies in foreign countries to provide services to customers around the world to reduce the taxation of VCCI information.