Similar to all other ASEAN countries trade and commerce is booming in Vietnam, making it a lucrative market for many foreign entrepreneurs. Despite the COVID-19 pandemic uncertainties, Vietnam’s economy had an estimated 6.5% GDP growth last year. Although this is a significant decline from the 8% growth in 2022, it still shows optimism in the Vietnamese economy as it takes on the export markets of China, the US, and the EU.
The downturn in 2023 was due to moderate growth in the service sector and higher prices which affected the interest rates of investors and households. However, it didn’t stop the country from getting a US$7.8 billion foreign direct investment as FDI projects (590) are soaring in the renewable energy, processing, and manufacturing sector with most of it coming from Singapore (US$1.43 billion) followed by Japan, South Korea and China.
This shows the market potential of Vietnam in drawing investors from all over the world. However, finding the right business opportunities in Vietnam can be a daunting task if you don’t know your potential market value and the right industry for your business. This article will help you understand and identify the emerging markets and demand for specialized services in the country, letting you explore the business landscape of Vietnam.
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A Dynamic and Emerging Fashion Industry
The Vietnamese Fashion Industry is the ideal place to find investment opportunities as the luxury retail market is estimated to reach the US$957 million mark in the next four years with a projected annual growth rate of 3.23%. The mid-range luxury fashion market will hit a US$8.6 billion value by 2025 as it has an 8.6% CAGR (Compound Annual Growth Rate).
This boom in the fashion industry is sustaining because of the 2019 EU-Vietnam trade agreement which reduced 99% of taxes and regulatory barriers in this segment, making luxury items easily available to customers. Hence, the luxury retail market grew with the per person GDP of the country reaching US$2800, a 2.7 times growth despite the pandemic. Additionally, luxury residences and hotels have grown in the country, developing the luxury shopping market in Vietnam and drawing international tourists.
The rise in the consumer demand for luxury goods makes the fashion industry the right choice to look for business opportunities in Vietnam. This is visible in the growing presence of luxury brands like Louis Vuitton, Berluti, Dior, and Tiffany & Co. in popular Vietnamese cities like Ho Chi Minh City and Hanoi which are major tourist destinations.
Read Related: Exploring Vietnam as A Haven of Luxury Clothing Brands for Foreign Investors
While consumers in Vietnam always favored the fashion sector, it has grown recently because of the expansion of the urban middle class having an enhanced taste of the finest things of the world as their living conditions have improved. This change in consumer demand coupled with features like user-behaviour analysis and supply chain analysis is helping companies to create tailor-made products for customers and develop a more robust marketing strategy. Hence, the pool for business opportunities in the Vietnam fashion industry has improved. It’s not restricted to the sewing and clothing materials business which saw US$4872 million in sales in 2021.
Consulting Services: Increasing Demand for Specialised Expertise
For most foreign investors, consulting services are the best choice to find investment opportunities in Vietnam as it doesn’t require much capital and have low expenses. This sector is known to bring a high margin of profits without much investment if you have the right expertise to cater to the increasing demand of the industry.
As per a Mordor Intelligence report, the consulting services industry’s market share will reach 411.48 million in the next four years (2028) growing at 4.96% CAGR. As the economy of the country grows, more and more businesses are trying to improve their services and products by diversifying and developing solutions for domains like HR, IT, strategy, and operations. This requires the help of overseas consulting firms as 98% of SMEs are looking for foreign experts.
Companies should take advantage of this situation and offer consulting services in the following domains:
- Human Resource Consulting
- Engineer Consulting
- Digital marketing services
- Business solutions provider for other businesses
Informational Technology Capturing Growing Interest
Vietnam is developing as a tech hub and the Information Technology or IT industry has a crucial role in this. The technology sector witnessed a 10% increase in year-on-year revenue in 2022, reaching US$148 billion, up from US$136 billion revenue in 2021. The fact that the IT sector is one of the best avenues to find investor opportunities in Vietnam can be seen from the presence of 4 world-renowned tech unicorns – VNLIFE, VNPay, VNG, and Tiki – each of whom has a valuation of over US$1 billion.
In addition to that, a recent forecast from the Australian Trade Commission has revealed that the information and communication technology or ICT sector of Vietnam is growing at 8% until 2026 which will see a US$1 trillion increase in the country’s GDP by 2025. This ascertains the growing importance of the IT industry in Vietnam as it has become the epicenter of software development outsourcing and IT hardware services.
E-commerce is also another avenue to consider if you are looking for business opportunities in Vietnam as the rapidly developing digital economy of the country led to a boom in this sector
As the GDP is expected to witness a steep 7-16% (US$28.5 billion) increase in the next six years (2030), foreign entrepreneurs should set up businesses in the following domains in the IT sector of Vietnam
- Fintech
- Cybersecurity solutions
- Blockchain, AI, and machine learning
- Software applications
- Software development outsourcing
- IT services
- Digital transformation services
- Gaming production
- R&D services
- Digital entertainment production
The number of digital technology companies in Vietnam is estimated to reach 100,000 in 2030 having 1.5 million employees, up from 50,000 companies with just over 600,000 employees in 2020. All this is due to the huge tax incentives available in the country to attract foreign investments, good infrastructure, and competitive costs that are driving the development of high-tech parks in Vietnam.
Read More: The Developing IT Industry in Vietnam: Update 2024
Retail and E-commerce: The Leading Sector in Southeast Asia
When it comes to finding investment opportunities in Vietnam, the Retail and E-commerce sector is where you should look. The demand for essential and other items has increased courtesy of the changed consumer behavior since the pandemic. This sector has a huge potential for growth as the $3000 per capita is breaking 1 million people into the middle class every year who are responsible for boosting retail shopping including e-commerce.
Read More: Retail Industry Standards and Trends in Vietnam for Foreign Investors: Strategies for Success
The e-commerce industry of the country will reach US$56 billion gross merchandise value (GMV) in Southeast Asia by 2026. It is more than 4 times what was predicted in 2021, making it the best place to look for business opportunities in Vietnam.
Vietnam’s E-commerce sector is the fastest growing one in Southeast Asia as 7 out of 10 customers in the country have access to the internet and the number of digital users touched 53 million in 2021. 70% of the Vietnam population had internet access in 2021 with 53% using e-wallets for online payments. All this happened due to the 50% increase in online consumer purchases in Vietnam in 2021, leading to a growth in the number of online retailers by 40% and a 1.5-fold increase in retail sales.
Several factors are responsible for this consumer behavior change towards e-commerce. These include a favorable legal environment, with 5 out of 6 e-commerce regulations in the ASEAN region coming from Vietnam. Another factor is the promotion of a cashless society by reducing cash transactions to less than 10% of all payments in the country. Additionally, the banking population is now hitting the 70% mark.
All these elements are contributing to the projected growth of the e-commerce sector by 2025. The market volume is expected to reach US$23.71 billion. E-commerce platform users are likely to hit 70.9 million, with a penetration rate of 70.1%.
Global investors are tapping into the huge growth potential of the Vietnamese retail market which is expected to grow at 12.05% CAGR in the next 5 years (2024-2029) reaching US$488.08 billion by the end of 2029. The Vietnam retail market already has an estimated value of US$276.37 million in 2024 having a consumer base value of US$30.3 trillion. Hence, investors who are looking for business opportunities in Vietnam should exploit the gap in the market and explore the following fields:
- Online retail platforms
- Grocery stores
- Specialty shops
- Department stores
- Discount stores
F&B Industry: Continual Expansion
The rapidly growing food and beverage (F&B) industry presents an excellent avenue for franchise opportunities in Vietnam. Since most consumers of the F&B industry are looking for special value experiences like foreign cuisine, healthy food and drinks, food truck, and coffee truck experiences, and the presence of famous beverage franchises, investors can tap into these business opportunities in Vietnam.
The growth forecast for this sector was US$35 billion by 2024 with a growth rate of 7% CAGR. Several segments like food service, food processing, food delivery, and beverage production are shaping up this boom in the industry, making them lucrative business opportunities for foreign entrepreneurs.
The change in age demographic and food preferences are also reflected in the F&B trends as more people are visiting shopping malls, cafes, and restaurants in their leisure time. While the 18-25 age group people are into fast food, the 25-34 age group prefers restaurants, pizzerias, and cafes. Hence, investors are trying to expand into these types of businesses in Vietnam.
Read More: Food & Beverage Industry in Vietnam: Market Overview and Investment Opportunities
Tourism Industry: Robust Recovery
The tourism industry is for those foreign enterprises who are looking for land investment opportunities in Vietnam as it’s one of the sectors that drive the economy of the country. In 2021, the tourism industry made up 12% of the GDP of Vietnam, recovering from the COVID-19 downturn which the government boosted further with its 8 million global tourists attracting target by 2023.
This is visible in the way Vietnam attracted 2.1 million tourists in the first 10 months of 2022 which is a 24.9-fold rise from the 2021 footfall, adjusting the 2022-2023 forecast to 8-9 million foreign tourists. The infrastructural boost on building metro systems and highways has paved the way for this tourism and hospitality sector growth as the cities developed rapidly.
The cultural heritage and the natural beauty of the country coupled with the hospitality of the people, make Vietnam an attractive destination for tourists, leading to robust growth in the tourism industry.
Read More: Why You Should Invest in Hospitality and Tourism Industry in Vietnam?
According to the UN World Tourism Organization, Vietnam is the third largest fastest growing tourist destination in the world and Asia’s leading one with most people visiting Hanoi, Ho Chi Minh City, Quang Ninh, and Da Nang. Hence restaurants, hotels, and resorts in these cities are booming in business activity and offer the best business opportunities in Vietnam. Apart from these segments, investors can also set up entertainment and travel agencies to take advantage of the tourism sector growth.
Promising Future in Renewable Energy
Vietnam has a vibrant energy market, especially in renewable energy as it aims to be carbon neutral by 2050. This is visible in how it ranks in the global Smart Grid Index (SGI) as Ho Chi Minh City power corporation stood at 47th position out of 94 global companies from 39 nations. This second-highest score of 71.4 was achieved in 2022.
As of August 2023, most of the 85 transitional renewable energy projects(74) in Vietnam were temporary pricing to EVN power electricity trading company which totaled 3999.86 MV energy production. Of these 59 projects were completed and 58 were approved to generate 3,181.41 MW of power from 17 plants. In July 2023, these transitional projects generated 0.4% of the total electricity of Vietnam, 211.7 million kWh of power. This shows the investing potential of this sector as energy production exceeds 110% and the country needs US$150 billion in investment by 2030 to fulfill its 2050 energy capacity target of Vietnam to enhance its energy capacity to 97GW.
Read More: Vietnam Renewable Energy: Advantages and Growth in the Green Energy Industry
Healthcare Services and Medical Devices Business
Despite entry barriers like capital investment and medical licenses, healthcare services remain a lucrative sector to look for business opportunities in Vietnam as the market value of this industry is slated to reach US$2486.65 million by 2030, courtesy of an aging population with decreasing birth rates which is triggering demand. The rise of non-communicable diseases has also made it a good sector to find investment opportunities as 74% of total deaths are attributed to these illnesses. The healthcare and medical devices business is evenly distributed amongst private (49.5%) and state (50.5%) sectors.
Read More: Healthcare Industry in Vietnam: Market Trends, Hospital Investments, and System Dynamics
Innovations in Logistics and Warehousing Technology
The FDI policy and the low cost of manufacturing in Vietnam compared to other economies like China and India have made it a hub for logistics and warehousing business. As of 2022, it stood at 8th place in the global developing logistics market because it optimized the supply chains and enhanced the routes with advanced technology like AI, robotics, and automation. Similarly, the country has modernized and expanded its warehousing capabilities, making it capable of handling a wide variety of products and reducing waste. This AI and automation boom coupled with its network of ports (50 ports spanning 1 million sq km of sea) has made this industry a viable option for business opportunities in Vietnam.
Read More: Setting Up a Logistics Company in Vietnam: 3PL and 4PL Logistics Emerge as Trends
Manufacturing: Vietnam’s Journey to Industry 4.0
Vietnam has become a manufacturing center where several Japanese, American, and other companies like the tech giant Apple and toy-maker Lego Group have moved their productions to the country. This is all due to the availability of cheap labor, tax incentives (0-15% corporate tax for 15 years, 20 flat CIT), and a conducive FDI policy which makes it easier for foreign entrepreneurs to find investment opportunities. Apart from footwear and textiles, Vietnam is now a good electronics, automotive, and machinery manufacturing market.
Vietnam exceeds the global average of 60% of exports of manufactured products by 30% to reach 90% in 2022. Now, they are trying to enhance the production of high-tech products to 45% and be in the top 3 industrialized ASEAN countries by 2030 with the help of Industry 4.0, AI, and IoT.
Read Related: Setting Up a Manufacturing Company in Vietnam: Benefits, Industries, Procedure
Real Estate: Opportunities for Growth
Vietnam is a favorable ground for land investment opportunities as seen in the 270% year-on-year housing market supply in the first half of 2021 despite the pandemic downturns. Most of this real estate business opportunity in Vietnam is concentrated in Ho Chi Minh City, Hanoi, Nha Trang, and Da Nang
While the office real estate industry is booming in Ho Chi Minh and Hanoi as seen in the 90% occupancy rate, making it a viable option for property investors, Da Nang and Nha Trang are lucrative for hotels and resorts because of their tourism drive.
Read More: Property in Vietnam: 7 Key Insights for Foreign Investors to Thrive
The Apparel and Textile Industry
While the apparel and textiles industry surged in 2022 with 14.7% year-on-year growth, in 2023 it declined because of a 19.6% export dip in the first two months of the year. However, the apparel sector offers good business opportunities in Vietnam as the market is projected to reach US$6.71 billion in revenue in 2024. The clothing market will have a 3.73% CAGR in the next 3 years (2024-2027), with women’s apparel taking the largest share (US$3.39 billion by 2024).
While the market volume is expected to grow by 2.8% in 2025, the manufacturing capacity will reach 1.4 billion pieces by 2027. This makes it ideal for investors to find investment opportunities in clothing or footwear businesses in the country. International brands can also seek franchise opportunities in Vietnam because they are in demand. Nike and Adidas are good examples of it, as nearly half of their global production happens in Vietnam.
Read More: Vietnam Clothing Manufacturers: Why Vietnam is a Premier Destination for Apparel Production
Conclusion
In conclusion, Vietnam presents a vast array of business opportunities for foreign companies eager to expand their operations. The key to success lies in recognizing the burgeoning markets within the country and leveraging the strategic advantages it offers. These advantages include generous tax incentives, favorable foreign direct investment (FDI) policies, competitive labor costs, and a stable political environment. Furthermore, Vietnam’s commitment to embracing technological advancements, such as artificial intelligence and automation, creates a dynamic and forward-thinking business landscape. By capitalizing on these factors, foreign companies can position themselves for sustained growth and success in this rapidly developing market. With careful planning and strategic investment, the potential for achieving significant business milestones in Vietnam is substantial and promising.
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