- Number of issues related to risks arising when investing from abroad in Vietnam
– Politics and legal
Political stability and the legal system are not always guaranteed at a high level, which can create uncertainty for foreign investors. For example, according to the plan, by this date, this time will complete the clearance of the site, there is a clear plan but the appointment is not finished but usually lasts 2-3 years. With such a delay, no investor would want to work on such a project. This is considered one of the biggest risks in investing in Vietnam’s infrastructure investment projects.
– Infrastructure risks
The financial system and infrastructure in Vietnam are still evolving, so infrastructure and infrastructure risks may affect investment. Despite developments, transportation and electricity infrastructure is still being upgraded and improved in some areas.
– Market fluctuations and exchange rates
The financial market and labor market in Vietnam can fluctuate drastically, affecting the profits of foreign investors. Exchange rate fluctuations can also create risks for foreign-invested businesses. If this is considered a macroeconomic policy risk, it can be overcome, with only a few percent increase per year, it will not be a problem. However, if investment projects take place over a long period of decades, it is also a problem for investors.
– Cultural and language risks
Cultural and linguistic differences can increase the cost and time for adapting and managing business operations in Vietnam.
– Human resources
Despite having an abundant workforce, some sectors require highly skilled labor and may have difficulty finding quality manpower.
– Tax policy and financial regulations
Tax policies and financial regulations can affect the profits and investments of foreign investors.
– Security and environmental risks
Security and environmental issues may also affect foreign investment in Vietnam. Climate change and environmental protection are becoming important concerns, especially for industries such as renewable energy and clean manufacturing.
– Competition and market volatility
Competition from local and international businesses can also create risks for foreign investors. Markets and industries in Vietnam are experiencing intense competition and volatility, requiring foreign investors to have flexible business strategies.
- Solutions to minimize risks
- a) Solutions to minimize macro risks
– Investors should disperse their portfolios into various industries, sectors and regions to minimize the impact of macro risks.
– Investors can use hedging instruments such as foreign exchange futures contracts to protect themselves from exchange rate fluctuations.
– Investors should purchase insurance to protect themselves from risks such as natural disasters, epidemics and social unrest.
– Investors should closely monitor economic and political developments in Vietnam to be able to make informed investment decisions.
- b) Solutions to reduce micro-risks
– Investors should conduct thorough due diligence before investing in any project in Vietnam. Due diligence should include an assessment of legal risk, financial risk, market risk and operational risk.
– The investor must comply with all applicable laws and regulations of Vietnam. Compliance with the law will help investors avoid legal risks and protect their rights.
– Investors should build close working relationships with local partners for support and advice on legal, cultural and business issues.
Investors should develop effective risk management strategies to identify, assess and control potential risks.
- c) Solutions to mitigate other risks
– Investors should purchase insurance to protect themselves from risks such as natural disasters, epidemics and social unrest.
– Investors should develop contingency plans to respond to unexpected situations such as natural disasters, epidemics and social unrest.
– Investors should closely monitor the local security situation so that appropriate precautions can be taken.
In addition, the Vietnamese Government should continue to improve the investment environment, improve the transparency and efficiency of the legal system, and strengthen anti-corruption to attract more foreign investment and minimize risks for investors.
Above is the content of KALF’s advice on Some issues related to risks arising when investing from abroad in Vietnam and solutions to reduce risks. All of our above advice opinions are based on applicable legal provisions. If you have any questions or requests about legal issues, please contact us for timely answers.
