Vietnam’s new dawn

The cities of Vietnam have become thriving, almost febrile centres of global business and trade. Even through COVID, the country maintained modest economic momentum and is now experiencing growth levels that most other countries can only envy.

Since the Vietnam war ended almost 50 years ago – America’s ignominious flight from Saigon forever etched on the memories of those who watched it – the country has had a stable, albeit authoritarian, government. It avoided the genocidal horrors of neighbouring Cambodia and has become increasingly attractive to multinational companies (MNCs) since opening up to foreign investment 35 years ago. So, what are the attractions?

For starters, Vietnam has a young labour force that is hungry for work. Half of its near-100 million population is under 30 and there’s a growing middle class, a large consumer base, and a skilled workforce.

Next, there are competitive labour costs – on average, half those of China – and Vietnam’s openness to free-trade agreements with the EU, the UK, Australia and many more. South Korea and Japan now have a big presence in the country.

The country’s law on foreign investment, dating from 2020, defines operating boundaries and is intended to ensure adequate protections. Another draw is the corporate income tax regime: priority sectors pay less than the standard 20 per cent and, in some cases, are exempt. Where the normal VAT rate is 10 per cent, some sectors pay five per cent, or none at all, among them food, medicine, education, health care, public transportation, agriculture, and renewable energy.

According to the General Statistics Office, Vietnam’s gross domestic product grew by 5.66 per cent in the first quarter of 2024, led by manufacturing and service sectors. Ho Chi Minh City (formerly Saigon) remains its commercial driver. The world’s biggest brands have a presence there, Nike, Adidas, Google and Amazon among them. But Hanoi is growing, too. One of the capital’s attractions is its lower cost of living – companies often spend more on staff located in Ho Chi Min City.

This astonishing growth has been achieved despite Vietnam remaining entangled in bureaucracy. Its red tape is deep-rooted and persistent. This has implications for the relocation industry, shaping how FIDI Affiliates go about their business and the direction this takes.
‘This is a country of conflicts,’ says Stephanie Ralainarivo, General Director of Santa Fe Relocation Vietnam. ‘Large corporations are expressing interest in establishing a presence in Vietnam. There are opportunities available, but the bureaucratic processes can often be discouraging because of their length and complexity. Only assignees employed by licensed companies, authorised by the government to hire skilled foreigners with diplomas and experience, will receive a two-year work permit. The government still relies on physical documents and stamps, leading to unnecessary duplication and time spent at government offices.

‘Some clients struggle with the time it takes to resolve, but, if you appreciate Vietnam, you should try to understand the country instead of imposing your beliefs on it.’

It’s an important message, because foreign companies and investors can be thrown by Vietnam’s cultural differences and language barriers if they want things done rapidly. Regional language variations further complicate matters, to say nothing of the country’s legal maze and variable levels of enforcement.
Ralainarivo emphasises the importance of accuracy, as Santa Fe’s work for clients involves ensuring compliance and orderliness.

Santa Fe has been operating in Vietnam for 17 years, offering visa and immigration services, moving services, and destination services provision (DSP). The company hopes to expand its business if the government can reduce bureaucracy.

Hanoi offers a broad spread of opportunities for movers. ‘We have ambassador and NGO clients; also, clients from the UN and World Bank,’ says Erwan Dallasta, Asian Tigers Office Manager. ‘There’s a lot of investment from companies that decided to switch from China because of Chinese regulations – they want to diversify their supply chains.’ Mounting political tensions have been a major factor for businesses choosing to exit the country.

However, Vietnam’s own rules can also be complex; and the introduction of new post-pandemic laws have caused further issues. ‘That’s a challenge for us,’ says Dallasta. ‘DSP is growing – a lot more companies want advice on work permits and helping with shipments.’ Despite being a boom country, navigating parts of Vietnam remains difficult, throttled as it is by poor infrastructure. Traffic is so bad that the government bans trucks from the roads between 6am and 9am and 4pm and 9pm, around which the removals industry must operate as best it can. The news isn’t all bad. ‘There have been real improvements to the highway system up and down the coast, which makes things a lot easier,’ says Asian Tigers Country Manager Matt King. ‘We can also send things by rail and sea.’

Other crucial infrastructure improvements have ground to a halt, however, such as new bridges linking roads directly to ports. Ring roads around Hanoi, where there are factory areas north and south, also await completion – quite when is hard to guess. ‘I’m not holding my breath,’ says King, an American who grew up in Thailand and has been with Asian Tigers for 23 years.

One knock-on effect of inadequate roads is high logistics costs – ‘a bottleneck to business’, says Saigon Van owner Kim Ngoc.‘There’s room for a big improvement – the rapid growth of e-commerce after COVID demands better logistics services, especially last-mile delivery.’ Yet, undaunted, many small companies have become new entrants to relocation logistics – stimulated by the heated real estate market – competing with larger companies on price.

Meanwhile, post-pandemic, the number of people arriving in Vietnam from Europe or the US to work in MNCs has fallen. ‘Localisation of staff has been very evident,’ says Ngoc. ‘With new investment from China, Korea, India and Singapore, there are more Asian expats, but they tend to come without the family and stay in apartment buildings with furnished or semi- furnished properties. This has posed a big challenge – if we only focus on expat family removals, it will be very difficult to sustain the business.’

Saigon Van has now positioned itself as a destination services provider, with a growing emphasis on teaching expats what to expect when they arrive. ‘Vietnam’s culture, because of its history, is unlike any of its neighbours,’ says Ngoc. ‘Therefore, we have a support programme for new investors and corporates. It prepares them with the dos and don’ts, as well as the secret to success in dealing with Vietnamese in their daily life and at work. It also takes in religion, so expats can understand more deeply our reasoning and beliefs.’ Santa Fe also offers cultural awareness as a standalone service.

The country often presents a different face from that of its neighbours, says King: ‘In Thailand, everyone smiles and is welcoming. In Vietnam, they aren’t. You have to be respectful… you are in their country.’
This applies particularly to the north, adds King, who feels it is a legacy of the country’s bitter war against the Americans. ‘Life was harder there… the south was always more westernised. It can be harder to win trust in the north when doing business… people are more sceptical. Getting stuff done can be frustrating.’
But, he says, Hanoi has changed a lot, ‘for the better’, and is earning a dividend from ‘walking the tightrope of keeping the Chinese and the Americans happy.’

Vietnam is a country where family bonds are strong and crime low – it’s illegal to own a gun. One striking feature is that it spends far more than its regional neighbours on education, and the most on international schools. ‘The Vietnamese quality of spoken English is high – they really understand that it is important in business to be fluent,’ says King.

Saigon Van has been able to grow a business stream from its work for the British International School. ‘Teachers don’t have the budget for moving like expats from corporate accounts, and mostly have small shipments,’ says Ngoc. ‘We cluster teachers going to the same destination region to fill the container, giving them a cost saving. Our consolidation business started from there.’

From almost nothing 20 years ago, Vietnam’s rapid internet expansion means around 70 per cent of its population now have access to the worldwide web. In an IT-hungry nation, industries such as semiconductor production have taken off in a big way, drawing engineers and middle managers from abroad. It’s hardly surprising that the work, and rewards, lure young people. The downside is that it shrinks the pool of candidates seeking a career in removals. ‘Youngsters want to work with their brain,’ says Ralainarivo. ‘People over the age of 40 are the best to have, but are often already in jobs they like – they’ll only jump around if you double their salary. At interview, they are interviewing you.’

Some recruits also struggle with the concept of always-on customer service, she adds. ‘Moving is emotional – [clients] want you available almost 24 hours a day.’

However, Asian Tigers appears to be riding the challenges of recruiting staff. ‘We have long-term employees in the office, and we also attract young people,’ says Dallasta.

In one area at least, the digital tide has receded amid Vietnam’s preference for doing business face to face. During the pandemic, Asian Tigers carried out lots of video surveys, but the personal touch has returned – or, as Dallasta puts it, ‘we’re back to old school’.

In the wake of Vietnam’s dash for growth, sustainability has become a growing priority for some companies. Santa Fe is among those that have taken practical steps down this path. Many are small, but the view is that every little helps.

Printing on two sides of paper is mandatory if a document is intended for in-house use only, and there is only printing if necessary. They also recycle cartons that are in good condition for local transportation purposes.

On Fridays, employees are allowed to work from home to reduce electricity and petrol consumption, and they share rides to work. In addition, Santa Fe has introduced electric vehicles and addressed its paper-based culture by creating a secure platform through which clients and staff can share documents digitally.

There have been a few setbacks in the upward trajectory of this hyperactive country. For instance, Ralainarivo, based in Ho Chi Minh City, has recently seen a slowdown in banking, construction and real estate, although these are not major industries. She remains optimistic, however, and hopes these industries will return in the next 15-18 months.

When speaking with business communities, the opportunities are still in manufacturing and export, IT and digital economy, real estate – despite the current challenges – infrastructure, and renewable energy.
Meanwhile, Asian Tigers is eyeing Vietnam’s third city, Da Nang, which lies in the middle of the country.

‘We handle a lot of moving work for hotel staff in Vietnam, but these are smaller moves. Currently, Da Nang is our second-largest market, but it is not yet large enough to warrant opening an office there, but we are keeping an eye on it,’ says King.

Should Vietnam ever be liberated from the shackles of red tape – and lobbying bodies, such as the chamber of commerce, are leaning on government for that to happen – there could be another surge. ‘When opportunities arise, we act quickly to seize them,’ says Ralainarivo.