Vietnam Market Entry

Vietnam Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

One-off, simpler business cases can be implemented through standard export deliveries between the Czech manufacturer and the local customer (customer, distributor). However, if you are interested in a long-term presence on the local market, it is absolutely necessary to use a local representative or your own company representation in the place. Strong foreign companies often do not use local representatives, but after thorough market research, they engage well-paid local experts who eliminate the risks of entering the local market. Check smber for agriculture and fishing facts of Vietnam.

Distribution and sales channels differ depending on the type of commodity or service being sold. However, in general, the system of wholesalers is not widespread in Vietnam, which means that the importer ensures the distribution of goods according to their nature to retailers (retail, food, consumer goods) or directly to final customers (engineering equipment, production materials, larger technological units). However, Vietnam’s distribution system has been developing very rapidly in recent years. Especially in the area of ​​retail, the growth of new distribution networks and the strengthening trend of concentration related to the entry of large foreign distributors (AEON, BIG-C, Mega Market) can be observed. The Vietnamese company Vincom is also building its own distribution network of supermarkets and large shopping centers.

Vietnam’s customs system remains very complicated, heterogeneous and not fully in line with international practices. The main problem is the existence of too many rates, which brings with it a number of ambiguities and often ambiguous interpretation. In practice, it is quite often the case that the amount of duty is negotiable to a certain extent for some types of goods, and its actual amount depends on the experience and “skills” of the importer. This condition often complicates life for inexperienced and beginning traders. Other problems include relatively frequent changes in rates for a number of commodities, as well as widespread corruption among many customs officials.

The general level of import tariffs has seen a dramatic decline in recent years due to Vietnam’s membership in regional free trade agreements. Today, Vietnam has concluded a free trade agreement with the vast majority of its trading partners. However, the drop in customs rates is accompanied by an increase in various non-tariff measures and technical barriers to trade.

For Czech exporters, the new free trade agreement between the EU and Vietnam, which entered into force on August 1, 2020, brought about a fundamental change in the amount of import duties. The EU-Vietnam Free Trade Agreement (EVFTA) is the most extensive and the most ambitious trade agreement the EU has ever concluded with a developing country. The significant liberalization of trade flows within the framework of the agreement should enable up to a fifty percent increase in the volume of mutual trade within five years of its entry into force. From the middle of 2020, there will be not only the gradual removal of customs duties on 99 percent of traded goods, but also the simplification of customs procedures and the removal of non-tariff barriers to trade. The agreement also makes it easier for European firms to access Vietnamese government contracts and provides stronger protection for intellectual property rights. While EU firms have easier access to the Vietnamese market for machinery, equipment, automobiles, alcoholic beverages and agricultural products, the agreement has opened up the European market to Vietnam for products such as textiles, footwear, agricultural products, seafood and wood products. From the agreement, the European Union also promises an overall improvement of the business environment in Vietnam and the facilitation of the entry of European companies into a number of hitherto protected sectors.

Forms and conditions of operation on the market

Foreign companies have the opportunity to operate in the Vietnamese market through four basic forms of companies:

  • Limited Liability Company (LLC)
  • joint-stock company (Joint-Stock Company – JSC)
  • branch (Branch)
  • representative office (Representative Office)

The easiest way to enter the Vietnamese market is to establish a representative office. The establishment of a representative office does not require any capital requirements. The only condition is the existence of the parent company in the home state for at least one year. Representative offices are particularly suitable for performing initial market analyses, as they are not considered a legal entity under Vietnamese law and cannot carry out commercial activities (sell goods or issue invoices). The activities of the foreign office are mostly limited to conducting liaison activities and promoting the parent company.

A branch of a foreign company, unlike a representative office, can conduct business and generate profit. A condition for the establishment of a branch is the operation of the parent company in the home state for at least five years. The authority responsible for issuing licenses for branches and representative offices of foreign companies in Vietnam is the Ministry of Industry and Trade of the VSR.

A limited liability company is suitable for companies looking for the greatest flexibility in expanding their activities in the Vietnamese market. The company can have from 1 to 50 partners and allows 100% foreign ownership with the exception of some protected industries.

The establishment of a joint stock company is suitable for companies that intend to use the local public stock exchange to finance their activities in Vietnam. A joint stock company can also be 100% owned by a foreign owner. The establishment of a joint stock company in Vietnam does not require any minimum share capital. When submitting an application for company registration, however, it is necessary to state a realistic base capital according to the type of expected business activity (approx. 10-25 thousand USD) and repay the base capital within 90 days of the company’s registration. The authority responsible for issuing business licenses for limited liability companies and joint-stock companies is the Ministry of Planning and Investments. Applications for registration of these companies are made through local people’s committees at local departments of planning and investment.

Marketing and communication

For the majority of Czech products sold on the Vietnamese market (primarily machinery and equipment), promotion at one of the thematically focused international and regional fairs can be recommended. In general, we can recommend trade fairs in Ho Chi Minh City, which surpass trade fairs and exhibitions organized in Hanoi in terms of scale and potential reach to customers in Vietnam. When promoting products for the Vietnamese state sector (defense and security industry, mining industry, energy), on the other hand, it is more appropriate to participate in one of the exhibitions organized in Hanoi.

When promoting consumer goods, the main marketing channels in Vietnam are roughly the same as in the Czech Republic (mass media, internet, billboards, advertisements in supermarkets and shopping centers). However, advertisements broadcast via social networks are far more important than in the Czech Republic. Vietnam has a relatively high number of Facebook users (68 million, i.e. 68% of the population) and Facebook is therefore used as one of the important marketing channels.

When choosing and correctly targeting marketing and promotional activities in Vietnam, you can also use the services of the Czech-Vietnamese consulting company Cekindo, which is implementing a project to support the economic activities of Czech companies in Vietnam. As part of the PROPEA project, up to 70% of the costs of the given service are subsidized from the budget of the Ministry of Foreign Affairs of the Czech Republic.

Due to significant cultural differences, we recommend that any marketing message be consulted in advance with one of the local marketing agencies, which will ensure not only the correct targeting of the advertising message, but also its suitability and acceptability. In general, it is recommended to avoid political and religious topics and messages that could offend national pride in marketing communication. The law expressly prohibits advertising aimed at children. Advertising containing the following products or services is also prohibited by law: alcohol (over 15%), cigarettes, breast milk substitutes for children under two years of age, prescription drugs, pornographic material, firearms and ammunition, sporting weapons that may incite violence, drugs.

Issues of intellectual property protection

The protection of intellectual property rights is relatively well treated legislatively in Vietnam. Vietnam recognizes the importance of protecting these rights including patents, trademarks and corporate identification marks, copyright and industrial designs. Vietnam is a long-time signatory to the Paris Convention on the Protection of Intellectual Property Rights, the Stockholm Convention and the Madrid Agreement on the International Registration of Trademarks. In 1993, Vietnam became a member of the Patent Cooperation Pact. International obligations on the protection of intellectual property rights are reflected in Vietnamese legislation in the Intellectual Property Law of 2005 (amended in 2009). In practice, however, there are still frequent cases of infringement of intellectual property rights both in the area of ​​trademarks and e.g. works of art or software, and their enforceability still lags behind legislative enshrinement. Most of the cases of their violation are solved mainly through administrative proceedings, and their solution is influenced by the small capacities and low qualifications of judges.

The newly concluded EU-Vietnam Free Trade Agreement (in force since August 2020) provides European companies with even stronger guarantees for the protection of their copyrights. As part of this agreement, traditional Czech designations of origin such as “České pivo”, “Budějovické pivo” or “Žatecký hop” are also specifically protected. In the treaty, Vietnam also committed to strengthen measures against trade in goods with a counterfeit trademark or geographical indication of origin at its borders. European SMEs can address their questions to the free EU IPR Helpdesk (https://www.southeastasia-iprhelpdesk.eu).

Public procurement market

Public tenders in Vietnam are governed by the Law on Public Procurement (Bidding Law) from 2013 and the relevant implementing regulation from 2014 (Decree No. 63/2014/ND-CP dated 26 June 2014 guiding Law on Bidding). According to the law, all state entities must announce public tenders for purchases exceeding the equivalent of VND 500 million (approx. CZK 500,000). Due to the great involvement of international financial institutions in Vietnam (especially the World Bank and the Asian Development Bank), a number of projects, especially in the field of infrastructure, are financed through their loans. Public tenders are also announced for these projects, which are governed by the rules of the relevant international institution. A general problem with tenders in Vietnam is the fact that that the vast majority of projects are already prepared from the beginning in cooperation with specific “potential” suppliers or are structured and focused in accordance with their interests and requirements. Companies that have a representative office in Vietnam, or have their interests covered in another effective way (e.g. a cooperation agreement with a relevant Vietnamese company), are practically the only possible candidates for success.

Tender information is published on the following website of the Ministry of Planning and Investment of Vietnam (only in Vietnamese): www.muasamcong.mpi.gov.vn. Information about planned tenders in English can be obtained from the following paid sites after logging in: www.tendersinfo.com, www.dau-thau.com.

Payment terms, payment ethics and resolution of commercial disputes

The most common payment terms when exporting to Vietnam is a documentary irrevocable letter of credit. In the case of smaller deals with unknown clients, especially small private companies, the advance payment system is also used. When purchasing goods of an investment nature or any larger deliveries, Vietnamese customers are required to secure a favorable loan, including installments of various lengths. Recently, the system of payment only after its sale has been extended for certain types of goods. These are mainly goods in fields in which there is a lot of competition – perfumery, small consumer goods. The payment morale of Vietnamese clients can generally be described as good. Care should be taken when doing business with unknown small private firms, especially if the business is done by correspondence. It may happen that after delivery of the goods,

Visas, fees, specific conditions for traveling to the territory

Visa
The visa requirement applies to holders of all types of Czech passports, with the exception of diplomatic passports. The validity of the travel document must be at least 30 days longer than the end of validity of the issued entry visa. Since 2017, a project has been in operation to issue electronic visas, which citizens of the Czech Republic can also apply for. We would like to inform Czech citizens that the Embassy of the Czech Republic in Hanoi does not have the power to influence the process of granting Vietnamese visas in any way. Please direct all questions regarding, for example, non-issuance of a visa, delayed issuance, etc., to the Immigration Office of the Ministry of Public Security of Vientiane.
Electronic visa it is issued only for one entry with a maximum validity period of 30 days. The application can be submitted on the website https://www.immigration.gov.vn/, which is maintained in English. A photograph and a copy of the data page of the applicant’s travel document must be inserted/uploaded in the electronic application. A visa fee payment also needs to be made during the visa application process. A decision on the application should be made within three working days. After successful registration of the application and payment, the applicant is assigned an access code that enables the visa to be printed. Entry to Vietnam on the basis of an electronic visa is possible only at selected international border crossings (Hanoi International Airport, Ho Chi Minh City, Da Nang, Nha Trang, Hai Phong, Can Tho, Phu Quoc, Hue and several ports and land border crossings).
The visa is also issued by the Embassy of the Socialist Republic of Vietnam in Prague. It is also possible to contact one of the Czech travel agencies, which will process the Vietnamese visa for the applicant for a fee without the need to visit the Embassy of the Slovak Republic.
Processing of the so-called ” visa upon arrival ” is governed by Article 18 of Law No. 47/2014/QH13 of 16/06/2014 on the entry and stay of foreigners in the territory of Vietnam (effective from 1/1/2015), which precisely determines the cases when it is possible to receive visa upon arrival at an international airport in Vietnam. These cases are:

  • the foreigner departs from a country where Vietnam does not have a diplomatic representation;
  • a foreigner comes to Vietnam on a tourist trip organized by a Vietnamese international travel agency;
  • foreigners coming to the funeral of a relative, or to visit a seriously ill relative;
  • foreigners arriving in Vietnam for the purpose of rescue, humanitarian and other actions of this kind at the invitation of the relevant Vietnamese authorities.

Please note that this type of visa is offered by hundreds of intermediaries online, whose credibility and quality of services vary widely. Tourists can contact any travel agency that has the necessary license to provide tourism services in Vietnam. To verify whether the travel agency is authorized to provide the mentioned service, it is necessary to contact the Vietnam Tourism Authority (VNAT) directly.
You can only enter Phu Quoc Island without a visa for 30 days for tourist purposes. Tourists must arrive via an international border crossing (by air or ferry from Cambodia) and depart in the same way. If travelers from Phu Quoc Island wish to continue on to Vietnam, they can apply for a visa at the Phu Quoc Immigration Department at: no. 2, 30/4 Road, Duong Dong, Phu Quoc, Kien Giang. On the territory of Vietnam, any changes to the visa during its validity are made exclusively by the Immigration Office of the Ministry of Public Security of the Socialist Republic of Vietnam. For detailed information on visas, please contact the Embassy of the Slovak Republic in Prague.

Obligation
to register Foreigners are obliged to register with local authorities (people’s committees, police) according to the place of accommodation. This obligation is usually fulfilled by the accommodation provider (usually the hotel or the family where the foreigner is staying). In other cases, the foreigner himself is responsible for registration. How to get a work permit and who provides it, salaries, minimum wage (if any), social and health care and its provision.

Traveling to Vietnam
Airport fees are included in the ticket prices, it is not necessary to pay upon departure. According to the current situation, medical examinations (temperature measurement with a thermal camera) may be carried out when entering Vietnam. Neither a Czech nor an international driver’s license is valid on the territory of the Slovak Republic. For short-term stays, due to the traffic situation, it is advisable to rent a car or motorcycle with a driver. The police will issue a Vietnamese driver’s license to foreigners living in the VSR for a long time. The international vaccination certificate is recognized by local authorities. No mandatory vaccinations are required when entering the country. However, after consultation with a doctor, it is recommended to undergo basic vaccinations for less developed tropical countries (hepatitis A and B, tetanus, typhoid, TB, Japanese encephalitis). Dengue fever can occur to a greater extent in the south of the country, malaria in mountainous areas, there are cases upon cases of bird flu and H1N1 flu in the country. Cholera has been reported in northern Vietnam. In recent years, the number of people infected with the HIV virus has also increased sharply. During your stay, it is therefore necessary to observe basic hygiene habits, consume heat-processed foods and avoid untrustworthy catering facilities. Bottled drinking water is commonly sold throughout the country, but the integrity of the packaging must be checked.

Travel to Vietnam in connection with the COVID-19 pandemic
On 15/03/2022, the Vietnamese government resumed the acceptance and issuance of all types of visas. Upon arrival in Vietnam, it is required to present a negative result of an RT-PCR test not older than 72 hours or an antigen test not older than 24 hours (does not apply to children under 2 years old). Quarantine is no longer required, nor is proof of vaccination against the disease Covid-19 or confirmation of the disease. Wearing face masks in public is mandatory in the country.

Employment of citizens from the Czech Republic

Employment of foreigners/Czech citizens requires a work permit, which is issued based on the employer’s request. For this, the foreigner must provide a number of documents (excerpt from the criminal record, etc.). Foreigners working in Vietnam for less than 30 days, and in total no more than 90 days per year, do not need to apply for a work permit. The labor office does not have to be informed, but the employer must arrange the relevant visas.

The application for a work permit is approved by the labor office, but the local employer must report to the provincial people’s committee for which job position he requires a foreign worker. The employer does not need to inform about his needs to use foreign labor if he meets the condition of working within 30 days and further in the case of a study internship.

Foreign experts and specialists must provide proof of a university education in a given field or 5 years of documented experience to apply for a work permit in Vietnam. The time to issue a work permit has been reduced from 10 to 7 working days. Each applicant for a work permit must meet the following basic conditions:
– minimum age of 18,
– good health for the performance of the given profession,
– the applicant must be a manager, executive director or expert with the necessary technical skills required for the job position,
– a clean criminal record.
The health certificate is valid for 12 months. An extract from the criminal record is required from the country of permanent residence. If the foreigner has a permanent residence in Vietnam, the statement must be issued by a Vietnamese authority.

A work permit is issued for a maximum of two years. A work permit can be extended only once. An application for extension/renewal of a work permit can be submitted 45 days before the expiration of the current permit. When applying, it is necessary to present an existing work permit or a report of loss from the police station. New applications for the extension of a work permit must meet the requirements of the new Labor Code of 2019 and provide the following documents:
– Evidence from a foreign agency, organization or company that the applicant is a specialist in the field in question.
– University diploma (or proof of higher education) and confirmation that the applicant has experience/practice in the field relevant to the position the applicant is offered to perform in Vietnam.

Fairs and events

Important exhibitions and fairs in Vietnam in 2022:

Trade fairs in Hanoi:
VIETNAM EXPO (general exhibition), 13.- 1VIETFOOD
&PROPACK VIETNAM (food industry), 11.-13.8.
MINING VIETNAM (mining industry) 4.- 6.10.
), 19.- 21.10.
VIETNAM SPORT SHOW (sports equipment), 3.- 5.11.
VIETNAM AUTO EXPO (automotive industry), 16. -18.11.
VIETNAM MEDI-PHARM EXPO (health care), 01. – 03. 12

Fairs in Ho Chi Minh City:
VIETBUILD HO CHI MINH (construction industry), 14-18 April
SMART CITY ASIA (technology for smart cities), 26-28 May
LEDTEC ASIA (lighting technology), 26-28 5.
ICTCOMM VIETNAM (ICT), 09 – 11. 6.
VIETNAM ETE & ENERTEC EXPO (energy), 20. – 22. 7.
ILDEX VIETNAM (agriculture), 3. – 5. 8.
VIETNAM MEDI-PHARM EXPO (healthcare) 11.- 13.8.
VIETNAM PHARMEDI (healthcare), 14.- 17.9.
VIETNAM PRINTPACK (printing and packaging technologies), 21.- 24.9.
VIETNAM PLAS (plastics industry), 21.-24. 9. VTG (textile and clothing industry), 21.- 24.9.
VIETSTOCK (agriculture), 12.-14.10.
VIETNAM EXPO (general exhibition), 1.-3.12.
HARDWARE & HAND TOOLS EXPO (tools, machine tools), 1.- 3.12.
VIETNAM FOODTECH (food industry), 7.-10.12.

Vietnam Market Entry