Business Environment
Unlocking Market Potential: Exploring 5 Common Entry Options In Vietnam – An Analysis Of Pros And Cons
July 1, 2024
Entering a new market is a strategic move that demands careful consideration of various factors to ensure success and mitigate risks. For foreign investors eyeing the Vietnamese market, understanding the available entry options is crucial for aligning business goals with legal requirements and operational realities.
This comparative analysis examines five common market entry options in Vietnam: representative offices, branch offices, limited liability companies, joint stock companies, and public-private partnerships.
| Entity Types | Common Purpose | Estimated Setup Time | Pros | Cons |
| Representative Office RO | ➤ Not a separate legal entity
➤ Restricted to market research, liaison and quality control activities |
Time to Find Location + 6-8 Weeks NOTE: Applies to normal investing projects whose objectives/business lines are under WTO Commitment. For special cases, the timeframe will be prolonged. |
➤ Simple registration process | ➤ Cannot conduct revenue-generating activities ➤ Parent company bears liability |
| Branch Office BO |
➤ Not a separate legal entity
➤ Permitted commercial activity within parent company’s scope |
➤ Can remit profits abroad | ➤ Limited to certain industry sectors
➤ Parent company bears liability |
|
| Foreign-Invested Entity FIE Also, LLC | ➤ Separate legal entity |
Time to Find Location + 2-4 Months NOTE: Applies to normal cases. For special cases, the timeframe will be prolonged. |
➤ Liability limited to capital contribution
➤ No restriction on the scope of business |
➤ Cannot issue shares
➤ Maximum of 50 |
| Separate legal entity JSC |
➤ Separate legal entity | ➤ Liability limited to capital contribution
➤ No restriction on the scope of business ➤ Can issue shares, go public |
➤ At least three shareholders required
➤ Supervisory board required for most JSCs |
|
| Public Private Partnership PPP |
➤ Entails partnership between foreign or domestic enterprise and government for infrastructure projects |
Negotiation Time + 2-4 Months |
➤ Government aggressively pursuing PPPs to develop infrastructure | ➤ Several PPP models
➤ Investors unsure of returns |
Each market entry option in Vietnam offers unique advantages and disadvantages, catering to different investor profiles and business objectives. While representative and branch offices provide a quick entry point for market exploration, LLCs and joint stock companies offer more substantial legal protection and operational flexibility. Public-private partnerships, though complex, can unlock opportunities for collaboration with the government. In reality, the RO and LLCs are the most common structures selected by foreign investors.
Before selecting a market entry option, thorough analysis of legal requirements, compliance obligations, and long-term business objectives is imperative. By understanding the nuances of each option and aligning them with investment goals, foreign investors can navigate the Vietnamese market successfully while mitigating potential risks.
