Economy & Trade

Indian Investment in Vietnam – How to Structure Operations for Success

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By: Dezan Shira & Associates
Editor: Koushan Das

India and Vietnam relations have been marked by growing economic, commercial, and strategic engagement in the last few years. India ranks amongst the top ten trading partners of Vietnam. By 2020, both countries aim to achieve trade worth US$15 billion. Major areas of focus include hydrocarbons, power generation, renewable energy, infrastructure, tourism, textiles, footwear, medical and pharmaceuticals, ICT, electronics, agriculture, agro-products, chemicals, machine tools and other supporting industries.

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Vietnam Market Watch: Russian Investment, US Trade, and the Rise of Innovation

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Vietnam / EAEU FTA Produces US$10 Billion In Russian Investments

The Free Trade Agreement signed between Vietnam and the Eurasian Economic Union  (EAEU) has resulted in Russia announcing US$10 billion worth of deals with Vietnam.  The EAEU is a trade bloc between Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia, and has a GDP of US$2.2 trillion.

Russian President Vladimir Putin has announced that Russia and Vietnam have agreed on more than 20 high-profile joint investment programs, following a bilateral meeting with Vietnamese counterpart Tran Dai Quang in Moscow. 

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How to Draft Vietnamese Probation Contracts That Will Reduce Your Turnover

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By: Dezan Shira & Associates
Editor: Maxfield Brown

Finding the right workers can be a difficult task in any market, Vietnam being no exception. Fortunately, prior to entering into a binding labor contract in Vietnam, probationary periods provide both the employer and the employee an opportunity to assess their relationship. With minimized compliance, reduced compensation requirements, and fewer restrictions surrounding termination, probation contracts are an invaluable asset allowing foreign investors to safeguard their operations and reduce turnover.

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Who should use probationary contracts? 

Companies seeking to employ workers in high-skilled positions stand to gain most from use of probation contracts as a first step to prior to standard labor contracting. Not only are the skills for these jobs more subjective and difficult to assess within an interview, wage premiums attached to skilled labor in Vietnam can exacerbate the risks of onboarding of unqualified or unsuited candidates. Generally speaking, the higher the salary of a potential employee, the greater value is added by a probation contract arrangement.

Given the shifting position of Vietnam in the value chain, many sectors are susceptible to turnover. At present, IT, professional business services, and managerial positions in manufacturing are all in high demand and thus experience heightened levels of churn. Employers in all sectors, however, should be sure to assess the Vietnamese labor market and to implement probationary contracting if needed. 

How do probationary contracts differ from standard labor contracts?

Under the prevailing labor code of 2012, probation contracts are provided as a separate agreement to a standard labor contract.  As such, probationary contracts are subject to a reduced list of information and documentation requirements. The specifics of these requirements can be found above in the chart below outlining the differences in contract structuring: 

contract structure (2)

While separated from a legal standpoint, probation contracts can be issued in conjunction with a standard labor contract which will enter into force upon the successful completion of the probation contract. To tie the two agreements legally, clauses within the probationary contract may specify the continuation of a working relationship through a standard labor contract following the successful conclusion of the probation contract. This approach is popular in practice as it allows employers to effectively negotiate with potential candidates prior to the probation stage. Alternatively, it is also possible to incentivize performance over the period of probation by inserting clauses within the probation contract which offer employment but leave salary and benefits negotiations until after the probation period. 

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What length of probation is permitted? 

Probationary periods permitted for a given position are proportional to the education required for the position and range from six days to 60 days. These contracts are limited to a one-time usage and must be converted to a standard contract of one year or more if both parties wish to continue the relationship beyond the period specified in the probation contract. Existing probationary contract lengths specified under Vietnamese employment law include:

60 days: probationary periods of up to 60 sixty days are reserved for positions that require professional or technical skills that demand a collegiate education or higher.

30 days: probation periods of up to 30 days may be applied for jobs that require a professional skill set, technical qualifications, some of which may require some degree of education to obtain. 

06 days: For all other employment in Vietnam, including most manual labor and manufacturing, probation is limited to six days.

The distinction between the 30 and 60 day probationary periods is subject to clarification at the circular level and should be monitored closely when drafting contracts. As a matter of compliance, pursuant to Circular No. 05/2015/NĐ-CP, companies will be required to notify those undergoing 30 and 60 day probationary periods of their results three days prior to the conclusion of the probation contract.

How much do employers have to pay employees under probation contracts? 

Compensation for probationary employment is subject to the agreement set out by the parties involved and must be stipulated in the agreement negotiated by the employer and employee. While there is considerable latitude with regard to the amount of compensation that is to be provided for probationary employment, employers are obligated to provide compensation no lower than 85 percent of the going wage applied to the position for which the probation is in preparation.


About
 Us

Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEANChinaIndiaIndonesiaRussia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at vietnam@dezshira.com or visit us at www.dezshira.com

 

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dsa brochureDezan Shira & Associates Brochure 
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

 Managing Contracts and Severance in Vietnam 
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.

 

Vietnam / EAEU FTA Produces US$10 Billion In Russian Investments

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By: Dezan Shira & Associates

The Free Trade Agreement signed between Vietnam and the Eurasian Economic Union  (EAEU) has resulted in Russia announcing US$10 billion worth of deals with Vietnam.  The EAEU is a trade bloc between Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia, and has a GDP of US$2.2 trillion.

DZS RELATED: Pre-Investment, Market Entry Strategy Advisory Services from Dezan Shira & Associates

Russian President Vladimir Putin has announced that Russia and Vietnam have agreed on more than 20 high-profile joint investment programs, following a bilateral meeting with Vietnamese counterpart Tran Dai Quang in Moscow. 

Relations between Moscow and Hanoi have been developing as the latter is one of the biggest consumers of Russian military equipment. Vietnam signed a free trade agreement with the Eurasian Economic Union (EAEU) on May 29, 2015. Bilateral trade between Vietnam and the EAEU is expected to rise to US$30 billion by 2030 from a previous base of close to zero. 

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Vietnam is the first country to have negotiated a free trade agreement with the EAEU, and consequently, has the benefit of early bird status in both attracting investment from Russia in particular, and in exporting products to the EAEU. The EAEU bloc is strategically important as Belarus borders the European Union and goods entering the EAEU can easily be transported to EU markets. This is expected to be further enhanced as China, India, and Singapore are also all known to be negotiating free trade deals with the EAEU.  

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Assisting Foreign Investors into Russia
Dezan Shira & Associates´ Russian investment brochure offers an overview of the services provided by the firm – both foreign investment into Russia and Russian investment into Asia. It is Dezan Shira´s mission to guide investors through Russia´s complex regulatory environment and assist with all aspects of establishing, maintaining and growing business operations in the region.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

Import & Export in Vietnam: Key Industries & Free Trade Agreements
In this issue of Vietnam Briefing magazine, we discuss the key aspects of Vietnam’s import and export landscape, focusing on textiles, telephones and computer products. We then analyze opportunities for Vietnam among its inclusion in multilateral regional trade blocs, before examining the European Union-Vietnam Free Trade Agreement. 

 

HCMC City Attracts US$ 2.15 billion FDI in Six Months

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By: Dezan Shira & Associates
Editor: Koushan Das

In the first half of 2017, the city has attracted US$2.15 billion in foreign direct investment (FDI), double the amount from the same period last year. Major sectors that attracted investments include the processing and manufacturing sector, followed closely by wholesale and retail. Other sectors include automobile and motorbike maintenance businesses along with the information and communications industry. Looking forward, investment into the city will continue to surpass previous levels, driven by growing working age population, investor friendly policies, and slow but steady transition to high-value manufacturing.

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Vietnam Climbs 12 Places in Global Innovation Index

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By: Dezan Shira & Associates
Editor: Koushan Das

In the recent Global Innovation Index 2017, Vietnam jumped 12 places to 47th among 127 economies, its highest ranking in the last 10 years. The index aims to capture different factors of innovation by providing a rich database of detailed metrics for 127 economies. Among the Southeast Asian countries, only Singapore and Malaysia outranked Vietnam. The country’s impressive growth is being attributed to its improved business environment and competitiveness. Vietnam also leads the group amongst the 27 lower-middle income economies. Over the last five years, Vietnam has recorded an impressive growth in rankings from 76th place in 2013 to 71st in 2014, 52nd in 2015, 59th in 2016 and 47th in 2017.

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Vietnam – US Increasing Trade Relations

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By: Koushan Das

In May 2017, Vietnam and the US signed business deals worth US$8 billion. The majority of the deals were for aircraft engines and development of power generation capabilities, along with hospitality, science and technology, academia and energy. The deals are predicted to create more than 23,000 American jobs and help in reducing the US  trade deficit with Vietnam, which stood at almost US$32 billion in 2016. To sustain its export-driven economy and minimize the effects of US withdrawal from the TPP, Vietnam is pushing for increased trade relations with the US, its largest export market.

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Vietnam Market Watch: FDI Inflows, Da Nang Startups, and Aquaculture Exports

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Vietnam’s FDI Inflows Rise to US$4.8 Billion in April

FDI disbursed in the first four months of 2017 shows a strong year on year growth with inflows rising to US$4.8 billion, up 3.2 percent from the same period last year for a total of 734 newly registered projects. The total registered and additional capital in the first four months witnessed a jump of 40.5 percent, reaching US$10.95 billion. The growing numbers prove the increasing confidence of foreign investors in the country’s investment climate.

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Vietnam’s FDI Inflows Rise to US$4.8 Billion in April

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By: Koushan Das

FDI disbursed in the first four months of 2017 shows a strong year on year growth with inflows rising to US$4.8 billion, up 3.2 percent from the same period last year for a total of 734 newly registered projects. The total registered and additional capital in the first four months witnessed a jump of 40.5 percent, reaching US$10.95 billion. The growing numbers prove the increasing confidence of foreign investors in the country’s investment climate.

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Electronics Production in Vietnam: A Guide to Emerging Opportunities

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By: Eugenia Latova

While many industries of the Vietnamese economy are growing rapidly, perhaps the most exciting is electronics. Imports have nearly tripled from 2011 to 2016, while exports have increased by nearly 5 times — rising from US$12.8 billion to US$65.8 billion in 2015. In 2015 alone, electronics exports nearly doubled, something that took aggregate exports nearly four years to accomplish. In the years ahead, the implementation of key trade agreements, strong demographic tailwinds, and supportive government policies are likely to continue this trend and present a variety of opportunities for investors. To tap these trends effectively, it will be critical to understand recent events in electronics production, the structure of Vietnam’s electronics sector, and prepare to meet opportunities as they arise. 

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