A Guide to Investment Structures for Entering the Vietnamese Market: Forms of Market Entry

01 - Overview of Market-Entry Structures Available in Vietnam
There are seven principal structures for entering the Vietnamese market: establishing a local company, establishing a branch office, establishing a representative office, entering into a Business Cooperation Contract (BCC), investing under a Public-Private Partnership (PPP) arrangement, conducting trade without establishing any local entity, and providing cross-border services.

02 - Characteristics of Each Structure
2-1 Establishing a local company: the investor may be either a corporate entity or an individual (though some industries require a corporate investor). The investor may choose between 100% foreign ownership or a joint venture with a Vietnamese partner. Four company forms are available: the limited liability company (the most common), the joint-stock company, the limited partnership, and the general partnership. Ownership can be acquired either by setting up a new company or by acquiring an existing company through M&A.
2-2 Establishing a branch: this is available only in a limited set of industries — legal services, IT, consulting, construction, franchising, and financial services, among others — and requires approval from the competent ministry overseeing that industry.
2-3 Establishing a representative office: relatively simple to set up, but a representative office cannot conduct business activities that generate revenue (such as entering into contracts), and may only carry out market research and marketing activities.
2-4 Entering into a BCC: business is conducted on a contractual basis without incorporating a legal entity. However, this is constrained by a one-contract-per-investment-activity rule, and carries the risk of contract termination as well as difficulty for the Japanese side in maintaining control.
2-5 PPP structure: available in sectors the State designates as eligible — transportation, electricity, water supply and drainage, healthcare, education, IT, and others — and requires going through an investor-selection process (such as a tender). Minimum investment amounts are set on a sector-by-sector basis (for example, VND 1.5 trillion for the transportation sector).

03 - Trade-Based Structures
The principal models for developing a distribution channel are operating directly owned stores, using agents/distributors, and franchising (or some combination of the three). Establishing sound contractual relationships, taking measures to secure debt collection, and putting in place quality-assurance measures are all important. Providing cross-border services (delivering services remotely from Japan without a local presence) is the market-entry method with the lowest cost burden.