Australian Joint Venture in Vietnam


In the Southeast of the Indochinese Peninsula lies one of the world’s troubled countries; Vietnam. With a vast expanse of 331,690 kilometers square, the country is bordered by the Gulf of Tonkin, South China Sea, Gulf of Thailand, Laos, and the Republic of Cambodia. The most remarkable feature about Vietnam has been its coastline which assumes an S-shape and covers a length of 3,260 kilometers. The country is characterized by four major geographic sections. These include the mountain ranges, the characteristically fertile flatlands, the tropical lowlands, and the Red River Delta. In terms of weather, the Vietnamese climate is controlled by two major winds. These are the Dry and the Wet Monsoons. With temperatures ranging from 21to 27 degrees Celsius, the months of July and August are the most humid and hottest making it advisable for visitors to avoid the country during this period (Beresford, 1988).

Political and Economic Factors

Arguably, Vietnam has suffered the longest history of war than any other country. Without a doubt, this greatly affected the political economy of the country. Coupled by the Asian economic crunch in the mid-nineties, the country had to ensure that proper economic and political policies are enacted to come at par with other Asian countries (Amer,1996).

To prosperously carry out business in Vietnam, is a prerequisite to understanding the nature of the Vietnamese. The long history of war which was later substituted by isolation policy led to the development of an insular economic and political environment. Despite the increase in the number of foreign investors given the healthy market present in the country, most of the Vietnamese have not developed a welcoming culture. They tend to fear visitors given the political interruptions from foreign countries that eventually subjected them to wars. Consequently, the investment is highly welcome. However, the management of the company in question might not receive a similar welcome (Esmond, 1996).

The readiness of a country to open new markets through trade agreements with other countries greatly improves the investment within. The ease with which investors can trade beyond borders has well-documented advantages. Economic success directly depends on the tariffs imparted when trading across the borders, the quotas present within trade agreements, and proximity to large markets. In the case of Vietnam, its population of way above 88 million offers an appropriate market for any business venture. On the other hand, participation within business agreements with other countries further enlarges the Vietnamese market. For instance, Vietnam has recently increased its trade with China. This opened up the big Chinese market. Other major exporting zones include the European Union, the United States, Singapore, Australia, Taiwan, and Germany (Esmond, 1996).

The impetus of the domestic economic force was greatly increased by the country’s gaining of the WTO membership. With this, the economic reform agenda was rejuvenated preparing the ground for investors, both domestic and foreign. Another benefit associated with their membership was the removal of quotas on textile products within members. The Agreement on Textile and Clothing specified by the World Trade Organization allowed the textile industries in Vietnam to increase their exports within WTO member countries.

The political economy of Vietnam is also marred by weak structural competencies. This is evidenced by the low tax revenue despite the relatively high taxes imposed on businesses and people. The only viable explanation for this is the several loopholes within tax collection that eventually allows many people to evade tax. On the other hand, the phenomenon could be attributed to the generally low income of the citizens. In terms of expenditure, the Vietnamese government spends an amount that is four times the overall GDP (World Bank/International Monetary Fund, 1998).

In every country, there are legal frameworks through which business organizations must adhere to. The regulations cover areas like business set up, day-to-day running of the business, and also its closure. Consequently, these regulations could lead to consequences either negative or positive depending on the specifications. Studies show that regulations associated with the entry of business differ greatly between countries. However, an important point to note is that affordable and non-complicated entry requirements promote the economic outcome of a country. On the other hand, complicated and expensive procedures of entry lead to people engaging in corruption to speed up the process, resolution to informal businesses, increase prices of products at the consumer level, or simply shun establishing the business within that country and lookup for another option (World Bank/International Monetary Fund, 1998).

Considering this string of arguments, starting business in Vietnam is rated average. This consideration reflects their comparative measure on the four variables associated with the entry. The variables include the time or duration during set up, the total cost expected during the process, the ease or complexity involved in the procedure, and finally the paid-in minimum capital which involves the figure of money spent before registration is completed. Vietnam was ranked 109th overall with a maximum of 11 procedures expected during the launching of a mid-sized company. The overall time expected for the completion of the process is established as 50 days. During the year 2009, the percentage cost of set up was 16.8% of the total income per capita. Finally, the minimum capital requirements were zero percent of the income per capita (Buttinger, 1958).

To operate a mid-sized business in Vietnam, one must ensure that the name of the business is valid. This process is followed by getting a seal-making license. This is done from the office of public security. The company should then come up with a seal before publishing the announcement of its existence in the daily newspaper. The company has to apply for a tax code before buying VAT invoices from Municipal Taxation Department. Finally, the company has to register with the labor department before hiring employees and finally register with the trade unions. Other requirements include the construction permits for businesses that require warehouses and payment of taxes. The taxes involved in Vietnam include corporate income tax, labor tax, turnover tax, property tax include the tax imposed on the transfer of property, tax on the financial transfer, tax on capital gains, dividend tax, sales tax, vehicle tax, stamp duty and several other local taxes. The point to note is that all taxes are mandatory and have to be paid within the stipulated time frame (World Bank/International Monetary Fund, 1998).

Cultural considerations

The role of culture on the competitiveness of a business entity is well documented. Without a clear picture of the cultural perspective of a given country, one might lose important business deals simply for failure to observe a certain cultural belief of the client. Vietnam is not an exception. Vietnam is a country that can be classified as young. About 80 percent of the total population is less than forty years of age. In addition, the country boasts of 90% literacy level. While one could expect a lazy population after two decades under communism, Vietnamese are hard-working with a strong ethical character and a strong sense of entrepreneurship. The following section identifies some of the cultural practices that must be observed in Vietnam (Hofstede, 1980).

The Vietnamese population relies on upholding social relationships with dignity. Any person dealing with them must understand mutual respect in order to achieve credibility and trust. Furthermore, while Australians may consider personal needs with greater priority, it is the other way round in Vietnam. The family and clan are considered with dignity. Instead of considering individual needs with primacy, the Vietnamese consider these needs as subordinates of the family and clan needs. Consequently, heaping praises on an individual could end up counterproductive as the individual might end up embarrassed in public. However, praises should be heaped on groups and organizations. On the same note, criticism should be handled privately and if possible, indirectly because the face of an individual is highly valued within this culture (Esmond, 1996).

To the Vietnamese, society is supposed to dwell in harmony and love. In most cases, they would try all possible means to avoid a conflict. One of the areas that are affected by this culture is the refusal and acceptance of issues. In their culture, refusing a proposal right in someone’s face is considered impolite. As a result, a Vietnamese would accept an offer even though they had no intention of doing it just to ensure that they don’t look crude and impolite (Hofstede, 1980).

The inclination towards the Marxist ideology tends to make the Vietnamese an egalitarian society. As a result, women who hold high positions within organizations are given due respect. However, this is mostly if the women tend to exhibit character befitting the position. In addition to this, age carries with it respect in this society. They believe that aged people have wisdom and therefore accord them due respect (Davison, 2002).

Before meeting physically, there must be a written engagement before eventually meeting physically. This might take long because of the slowed reaction from the bureaucratic structure of governance. While a typical Australian might expect a handshake, the most common greetings in Vietnam is nodding or slightly bowing. When meeting a female, let her be the first to extend her hand. Also, the conversations must recognize titles and use of first names. For example, one should say “Minister Chang.” Furthermore, while the visit might be purely business, Vietnamese want to know more about the people they are dealing with. This means that the relationship has to be on a personal basis. When engaged in deep conversations, certain topics must be avoided greatly. They are the Vietnam War, sex, politics, and religion. This will assist one avoid losing a client (Buttinger, 1958).


One of Vietnam’s problems is the relationship between import and export. At the moment, the country exports much more than it imports. This means that a good solution has to address the issue of reversing the trend. There should be more exports than imports. To begin with, the country must further soften their entry requirements on foreign and domestic investments. This will increase production. The current state that places the country at 116th position is not favorable. Furthermore, the cost of production should be reduced in order to facilitate and encourage exports interests.

List of References

Amer, R., 1996. “Vietnam’s Policies and the Ethnic Chinese since 1975,” Soujourn: Journal of Social Issues in Southeast Asia, vol.11 No.1: pp.76-104.

Beresford, M., 1988. Vietnam: Politics, Economics and Society. London and New York: Printers Publishers.

Buttinger, J., 1958. The Smaller Dragon: A Political History of Vietnam. New York: Atlantic Books.

Davison, R., 2002, “Cultural complications of ERP”, Communications of the ACM, vol.45 No.7, pp.109-11.

Esmond, D., 1996. “Doing business in Vietnam: a cultural guide. Business Horizons. Web.

Hofstede, G.,1980, Culture’s consequences.Sage, Hills, CA.

World Bank/International Monetary Fund. 1998. Address of His Excellency Nguyen Tan Dung. Washington DC: 1998.

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