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Preparing to export

Consultation and bespoke research

There is a range of online information for exporters, including advice and guidance on how to thoroughly research overseas markets. Visit: https://www.great.gov.uk/ for more information.


Researching the Vietnamese market

Vietnamese regions will have different industry clusters and demographics. Therefore, regional plans and good local research is essential.

Ideally you should make regular visits to Vietnam as well as making contact with others in your industry/sector. This will enable you to access the most up-to-date advice and information, and may lead to new insights or at the very least form the foundation for further research.

Visit: https://www.great.gov.uk for information and guidance on how to develop your marketing strategy, competitor and SWOT analyses and customer/market segmentation. The IOE&IT can also offer help with this, visit: https://www.export.org.uk/.

You will need to determine whether there is a market for your product or service, if your pricing is competitive, and whether to adapt your business model.

The questions listed here should help to focus your thoughts. Your answers to them will highlight areas for further research and also suggest a way forward that is right for your company. You may then want to use this as a basis for developing a formal Vietnam strategy, although this may not be necessary or appropriate for all companies:

Your aims:

  • Do you wish to buy from Vietnam, sell to Vietnam or both?

  • Do you wish to establish your own company presence in Vietnam (for example a joint venture, a branch office, an agency, a representative office or a franchise)?

  • Do you need to be involved in Vietnam at all?

  • Do you see Vietnam as part of a wider plan including e.g. other Southeast Asian markets now or in the future?

Your company:

  • Can you carry out a detailed SWOT analysis of your company?

  • Are your competitors already in Vietnam? If so, what are they doing?

  • Can you carry out a detailed SWOT analysis of your competitors?

  • What are the Unique Selling Points (USPs) of your product or service?

  • Do you know if there is a market for your product or service in Vietnam?

  • Do you know if you can be competitive in Vietnam?

  • Do you have the time and resources to handle e.g. the demands of communication, travel, product delivery and after-sales service?

  • Are there any legal barriers to your business model?

Your knowledge:

  • Do you know how to secure payment for your products or service?

  • Do you know where in Vietnam you should start?

  • Do you know how to locate and screen potential partners, agents or distributors?

  • Have you carried out any Vietnam-specific customer segmentation, and do you know how to best reach potential customers in-market?

  • Have you evaluated business risks (such as protecting your IP) and conducted research and due diligence?

It is unlikely that you will have the answers to all these questions at the outset and these ‘knowledge gaps’ could form the basis for further research and investigation. Some of these questions will require quantitative research in your sector, while others involve more contextual and cultural considerations.

Talking to other people in your industry and regularly visiting Vietnam will give you access to the most current advice and such experience can often lead to new insights and form the basis for further research.

Guidance on developing an export plan, including marketing strategy, customer segmentation, competitor and SWOT analyses, etc. is available on the https://www.great.gov.uk/ site, and also on the Open to Export site at: https://opentoexport.com/info/export-action-plan/.

One option to test how viable your product or service could be in the Vietnamese market would be to attend trade shows generally held in Vietnam each year. The Department for International Trade (DIT) provides funding for eligible businesses in the form of grants to enable them to attend trade shows overseas via the Tradeshow Access Programme. Visit: https://www.gov.uk/guidance/tradeshow-access-programme for more information.

The funding helps your business to gather market knowledge, gain experience in attending and getting the most from overseas trade shows, and to receive advice and support from trade experts.

To discover future events and trade missions in Vietnam, visit the DIT events portal at: https://www.events.great.gov.uk/ehome/index.php?eventid=200183029&.

For company launches and events held at British Embassy and Consulate locations, contact the DIT team in Vietnam at: https://www.gov.uk/world/organisations/department-for-international-trade-vietnam#contact-us.

[Source – DIT, gov.uk]

 

Start-up considerations

UK companies can use a number of ways to get started in Vietnam. However, you should consider using a local presence such as an agent or distributor to successfully develop your business. In addition, you will need to visit the market a number of times to establish a personal relationship with a business partner.

British companies can approach the Vietnamese market in several ways:

  • export directly

  • set up an agency

  • appoint a distributor

  • open a representative office

  • open a branch

  • form a joint venture

  • set up a 100% British-owned company

  • enter into a business co-operation contract

  • enter into a Build-Operate-Transfer (BOT)-type contract

  • franchising/licensing

Distributorship agreement

When doing business with Vietnam, it may be more effective to set your business up using a local agent or distributor as it will save time and money due to their local knowledge and contacts. An agent is paid a commission and will work as a direct representative for your company within the market. Whereas distributors buy your product from the UK and then will sell them on in Vietnam for a profit.

Disadvantages can include losing sight and some control of your company, and you should make sure you are aware of agents who are promoting products or services which are the same or similar to yours.

Make sure you research a number of agents and distributors before deciding on which is right for your company. 

This research should include a company’s background (size, sales quality, customer reviews), who they are distributing to, and whether they are ultimately right to be selling or promoting your product.

You should visit your agent or distributor regularly and ensure that you work closely alongside them, in order to reach your product’s maximum sales potential in Vietnam.

Due diligence

Many problems can occur in Vietnam, but they can be avoided as long as you carry out due diligence before exporting. Make sure you obtain a letter of credit from the bank before exporting, this will prove a Vietnamese company’s ability to pay for your products/services. A company’s financial standing does not need to be checked if a letter of credit can be obtained.

You will also need a copy of the company’s business licence, which includes:

  • the legal representative 

  • contact details

  • registered capital value (limited liability)

  • company type

  • company start date

  • licence period

You should corroborate the information contained in the business licence against what you already know and, if there are any discrepancies, find out why. The information can be externally confirmed through due diligence done by lawyers, advisory firms and consultants. Make sure you find out who is legally responsible, in order to maximise your security.

Additional research must be carried out to help you solidify a business relationship that is based on more than just exporting. Copies of a company’s account may not be accurate and they also may not be up to UK standards, as different companies use different accounts depending on their customer base. Always make sure you check a company’s data from different sources.

Resident firms in both Vietnam and the UK can provide good-quality consultancy and assistance. These companies can look at the operation of a business and build up an accurate picture, carefully interviewing people who work in and with the firm in order to carry out operational, financial, legal and technical due diligence checks. DIT has lists of consultancies based in the UK and Vietnam that can provide due diligence checks on Vietnamese companies.

[Source – DIT]

Legal advice

Getting information in Vietnam can be difficult, so to avoid costly mistakes you should consider seeking help and advice from a local lawyer, as the tax and legal obligations of each business structure can differ. Updated lists of English-speaking lawyers in both north and south Vietnam are available at: https://www.gov.uk/government/collections/list-of-lawyers#v.

The Department for International Trade (DIT) in Vietnam can assist in locating and meeting potential agents and distributors. Visit: http://www.gov.uk/world/organisations/department-for-international-trade-vietnam#contact-us for more information. 

[Source – DIT Trade and Investment guide: Vietnam, gov.uk]

Direct exports and sales

Direct export means supplying your products/services directly to the customer and involves you taking care of the logistics of marketing, selling, sending overseas and getting paid.

However, getting information in Vietnam can be difficult so it is important to develop personal relationships – you should have a local representative acting as an agent, distributor or wholesaler for you, particularly as in some instances it will be necessary to pre-register exporters/producers.

To help you to identify local representatives in Vietnam, contact a specialist trade adviser at the Department for International Trade (DIT) at: https://www.gov.uk/overseas-customers-export-opportunities or the DIT team in Vietnam at: https://www.gov.uk/world/organisations/department-for-international-trade-vietnam#contact-us for further advice and lists of local agents.

Online selling

The Department for International Trade (DIT) can help you export your goods to Vietnam through the E-Exporting Programme. Find out more at: https://www.gov.uk/guidance/e-exporting.

DIT has also negotiated listings at better-than-commercial rates. See online marketplaces in Vietnam at: https://www.great.gov.uk/selling-online-overseas/.

You can find out more about the E-regulations governing Binh Dinh, Da Nang, Hai Duong, Hanoi, Ho Chi Minh City, Phu Yen and Vinh Phuc regions via the Ministry of Planning and Investment E-regulation site at: https://vietnam.eregulations.org/.

You should also be aware of Vietnam’s new cyber security law, which came into force on 1st January 2019. See the section on cyber security in the ‘What are the challenges?’ chapter for more details.

Franchising

Licensing and franchising are becoming increasingly popular options in Vietnam. To conduct business operations in Vietnam it is important to register with the appropriate government ministries, depending upon the nature of your business.

You can find out more about licensing and investment regulations by visiting the Vietnam Trade Promotion Agency website at: http://en.vietrade.gov.vn/

Also visit the international section of the British Franchise Association at: http://www.thebfa.org/international for more information on franchising.

[Source – Vietnam Trade Promotion Agency, British Franchise Association, DIT, DIT Trade and Investment guide: Vietnam, gov.uk]

 

Employing staff

Vietnam’s large workforce is mainly young and well educated, with the average age of citizens being just 30.

Since admittance to the World Trade Organization (WTO), the need for more skilled workers is greater than ever, although average wages in Vietnam are still lower than in neighbouring countries such as Thailand and China. Remuneration packages are likely to rise over time due to competition.

Employing foreign workers 

There is an entitlement for employers to recruit foreign workers for jobs that require specialist expertise which cannot be fulfilled by Vietnamese workers. There must be a training programme in place, however, that equips a Vietnamese national with the necessary skills to eventually replace the foreign worker.

A work permit must be obtained by foreign workers from the local Labour Department. Permits can take a while to arrange, so ensure you allow ample time. Foreigners, in certain circumstances, do not have to apply for a work permit, such as when providing short-term technical assistance, but companies are advised to check this as other documentation may be required.

Recruitment channels

Labour can be recruited either by the employer directly or with the help of an employment service agency. Companies must enter into labour contracts with their employees, either for a definite or an indefinite term. Definite term contracts can only be renewed three times before they automatically become indefinite term.

Multiple channels are available when recruiting staff in Vietnam, including:

  • online services for job adverts such as: www.vietnamworks.com

  • classified adverts (in French) for jobs are available from the local Vietnamese daily newspaper, Le Courrier du Vietnam and in Vietnamese from Nhan Dan (the Communist Party Newspaper) and Quan Doi Nhan Dan (Vietnam People’s Army Newspaper)

  • classified ads for jobs in English are available from the Vietnam Economic Times and Viet Nam News (state-run)

  • trade journals for key industry sectors – talk to the DIT teams in Vietnam for more information

  • recruitment services companies – there are several experienced domestic and international recruitment services operating in Hanoi and Ho Chi Minh City

(Source – DIT]

Recruitment process

When recruiting in Vietnam, be certain to carry out the same steps that you would take if recruiting in the UK. A probationary period can be decided upon between employers and employees, although this must not exceed 60 days for specialist work, and must be less than 30 days for all other work. Make sure you pay a probationary employee at least 70% of the job’s normal wage.

Carry out due diligence before offering a position, including undertaking personal background checks and checking all references.

Offer appropriate remuneration 

Adequate remuneration must be provided in order to recruit and retain the highest-level employees. In 2017, mid-level office managers in major cities such as Ho Chi Minh City earned on average US $800-$1,200 per month. You should consult DIT in Vietnam for the most recent figures, however, as salaries are currently rising.

The former Vietnamese Prime Minister, Mr. Nguyen Tan Dung, decreed a minimum salary increase for workers employed in Foreign-Invested Enterprises (FIEs) which raised minimum salaries in all three labour zones for unskilled and manual labourers in FIEs. Talk to DIT representatives in Vietnam for advice on specific positions and locations, and current salaries.

Overseas training and career progression

The opportunity to train overseas can be attractive to employees, but make sure when offering this training, your employees have committed to a specific period of time to stay with your company. Clearly defined career progression routes are also attractive to employees, which will help you to recruit and retain high-quality staff. Whilst Vietnam’s professional qualifications are not up to the same standards as those in the UK, some foreign companies will offer certain international qualifications such as ACCA, ICAEW, City & Guilds or CIMA.

It is possible that smaller companies setting up in Vietnam will only employ one individual to deal with all the elements pertaining to running the company. This may appear to be cost-effective and convenient, however, it is not necessarily recommended. If the employee is not experienced in the rules and regulations surrounding running an international office in Vietnam then you may run into non-compliance issues. The end result could be very costly for your business. It is also an obvious risk to rely on one person for all the financial and legal aspects of your business.

Social security

Vietnamese social security regulations can be complex, so you should double-check the latest rates.

Establishing a permanent presence

There are many benefits to having an in-market presence in Vietnam, including cutting out the ‘middleman’, showing your commitment to the country, providing direct access to the end-customer or supplier, enabling trade in the local currency, giving direct control over corporate strategy and activities, making the conduct of business transactions much easier, and – for some sectors and activities – fulfilling a legal requirement to have a permanent presence.

[Source – DIT]

 

Financial considerations

The local currency is the Vietnamese Dong (VND).

It is illegal to change money anywhere other than at official money exchange counters, where there will be clear signs showing this status.

ATMs are widely available in major cities and tourist areas, however, make sure you have cash as a backup in rural areas.

You can have funds transferred to Vietnam via international money transfer companies such as Western Union, MoneyGram or World Remit.

Getting finance to fulfil an export contract

Globally, Vietnam ranks 25th out of 190 economies for Ease of Getting Credit, in the World Bank’s Doing Business report 2020. See: http://www.doingbusiness.org/en/data/exploreeconomies/vietnam.

For UK companies that wish to sell products and services to Vietnam, there are schemes available to simplify the growth of your business and to fulfil an export contract. Contact your bank or financial adviser for more information about any current schemes.

Getting paid

A popular payment method for the import of goods is by a letter of credit. However, letters of credit are not always seen by Vietnamese banks as confirming an irrevocable commitment on their part. Ensure you seek a letter of credit opened by a foreign bank with a branch in Vietnam. Arrangements can sometimes be made between the beneficiary overseas and their banks (‘silent confirmations’) at a cost.

Payment risks

UKEF helps UK companies to get paid by insuring against buyer default.

You may have difficulty accessing foreign exchange. Be confident you will get paid for your export contract. Speak to one of UKEF’s export finance advisers at: https://www.gov.uk/government/publications/find-an-export-finance-manager for free and impartial advice on your insurance options, or contact one of UKEF’s approved export insurance brokers at: https://www.gov.uk/government/publications/uk-export-finance-insurance-list-of-approved-brokers/export-insurance-approved-brokers.


Transferring money

The State Bank of Vietnam (SBV) imposes strict controls on foreign exchange transactions. See: https://www.sbv.gov.vn/webcenter/portal/vi/menu.

You must get foreign currency convertibility rights from SBV as early as possible. Convertibility rights are normally part of the investment licence so are given to companies operating in specific import-substitute and other ‘important’ industries. Convertibility rights do not guarantee availability of foreign exchange.

Foreign currency is allowed out of Vietnam only when:

  • needed for payment for goods and services by an importer with an import licence and other supporting import documents (for example purchase contract, invoice, customs declaration form)

  • remittance of dividends has been cleared by Vietnamese tax authorities

  • repaying foreign loans and interest

  • paying salaries, bonuses and allowances to expatriate employees

[Source – UKEF, DIT Trade and Investment guide: Vietnam, gov.uk]


 

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