When choosing a business location in Vietnam, investors often opt for Ho Chi Minh City or Hanoi. However, Vietnam has plenty more to offer, and it is wise also to look further. In this article, we focus on business opportunities in Da Nang, the fourth largest city in Vietnam.
Six main benefits of setting up a business in Da Nang
With an area of over 1,200 km2 and nearly 1.5 million residents, Da Nang is the largest city in Central Vietnam.
In 2016, the Asia Institute of City Management (AICM) declared Da Nang to be the most liveable city in Vietnam, considering the business environment as one category of the criteria.
Therefore, Da Nang is an ideal location for businesses that would like to locate themselves in Vietnam, but also want to avoid big city problems such as pollution and traffic.
#1 Accessibility and developing infrastructure
Da Nang’s strategic coastal location between Hanoi and Ho Chi Minh City makes it a significant hub in Central Vietnam.
The third largest international airport and seaport of Vietnam are both located in Da Nang, and the city is also an important station along the North-South Railway, Vietnam’s main railroad.
Several national highways run through Da Nang as well. Road 1A provides connections with Hanoi and Ho Chi Minh City.
14B, on the other hand, connects Da Nang directly with Laos. In fact, Da Nang is at one end of the East-West Economic Corridor, a program created in 1998 for promoting cooperation between Myanmar, Thailand, Laos, Cambodia, and Vietnam.
Source: Asian Development Bank
Consequently, these features enable Da Nang to provide excellent conditions for doing trading business.
#2 Openness to foreign investment
According to the Investment Promotion Agency (IPA) Da Nang, foreign direct investment in Da Nang reached US$ 112 million in 2017.
Moreover, Da Nang has been continuously ranking at the top of the Provincial Competitiveness Index (PCI), outpacing 62 other provinces and cities in Vietnam.
PCI is the indicator for how well the local governments are creating favorable conditions for private sector companies in Vietnam.
#3 Developing industrial parks
Da Nang is also focusing on developing IT parks and the infrastructure for international connectivity and is thus becoming the IT and telecommunication hub of Vietnam.
Currently, there are six industrial parks, 1 Hi-tech Park and 1 IT Park in Da Nang. Together with positive development of IT companies and growing investments in Vietnam, the city will also require more support services.
According to the Vietnam Investment Review, the board of Da Nang Hi-Tech Park approved investment certificates for two large projects with a total worth of over US$ 62 million earlier in 2018.
Image source: Da Nang Hi-Tech Park
#4 Investment incentives
The government also provides favorable conditions to investors who invest in specific geographical areas or encouraged sectors. For example, in hi-tech industries or industrial parks.
These benefits include:
- Corporate income tax reduction or even tax exemption
- Import tax exemption for certain goods, e.g. machinery, and equipment
- Reduction of or exemption from land rental
Read more about tax incentives in Vietnam
#5 Growing population
Da Nang also stands out with the highest population and urbanization growth rates in the country.
In fact, the population of Da Nang has risen from 1 million inhabitants in 2015 to 1.4 million people in only four years.
#6 Increasing number of tourists in Da Nang
Lack of pollution, sandy beaches and several tourist attractions close by are the main enticements contributing to the increasing number of tourists in Da Nang.
According to Da Nang’s Department of Tourism, the number of tourists visiting the city grew to 6.6 million last year, which is 19% more than in 2016.
More tourists also mean more opportunities for investors. Therefore, it is an excellent time to enter the local hospitality business and, for example, open a hotel in Da Nang.
Challenges of doing business in Da Nang
Naturally, there are slightly more obstacles in Da Nang than when doing business in larger cities.
For example, some of the challenges that investors face in Da Nang:
- Lack of international schools, hospitals, services
- Smaller population compared to Hanoi and Ho Chi Minh City
- Good university for studying science and technology, but more challenging to find people for other sectors
However, these difficulties should not be seen only as limitations but as opportunities instead. Challenges also mean lower competition. With proper assistance and a well-planned entry strategy, however, Da Nang can be the place for your business in Vietnam.
Also, keep in mind that although not all business activities are suitable for Da Nang, there is a lot of promise for manufacturing, IT, and tourism-related businesses such as:
- recreational activities
Furthermore, as the population of Da Nang crossed the 1-million line in 2015 and is expected to reach 1.5 million people by 2020, there is also increasing need for education and healthcare services.
Encouraged investment sectors in Da Nang
The Investment Promotion Agency IPA Danang brings out sectors in which investment is highly encouraged:
Source: IPA Danang
Projects calling for investment in Da Nang
Under Decision No. 4072/QD-UBND, Da Nang’s People’s Committee has also issued a list of projects calling for investment in 2017-2020:
Number of projects
Training and education
|Tourism, service, trade||
Total number of projects: 68
Who is eligible for investment incentives in Da Nang?
Not every project can apply for incentives offered in Da Nang. If your project meets any of these following requirements, you are eligible for incentives in Da Nang:
- Investment projects in encouraged sectors (mentioned in the previous paragraph)
- Investment projects in Industrial Park, Da Nang Hi-Tech Park, and also in Hoang Sa Island District
- Projects with a capital of at least VND 6,000 billion (~US$ 260 million), VND 6,000 billion of which is disbursed within three years from the issuance date of the Business Registration Certificate or the decision on investment policies
- Projects in rural areas which employ 500 or more workers (except part-time workers or employees with a contract for less than 12-month period)
- High technology enterprises, science and technology enterprises, also science and technology organizations defined by regulations of law on high technology, science, and technology
Setting up a company in Da Nang
The incorporation process of registering a company in Da Nang is generally the same as in any other location in Vietnam and takes approximately 1-2 months.
Also, keep in mind that you need a registered address for your business before starting your incorporation process.
#1 Investment Registration Certificate
Firstly, any foreign company registration in Vietnam starts with applying for an Investment Registration Certificate from the Department of Planning and Investment.
The investment registration is the principal license for doing business in Vietnam.
#2 Business Registration Certificate
Secondly, you need the Busines Registration Certificate which is the second compulsory license for conducting business activities in Vietnam. The Department of Planning and Investment also grants this license.
Also, pay attention that after you have received your Business Registration Certificate, you have 90 days to inject the capital.
#3 Additional licenses and registrations
Depending on your business line, you may also need some operational permits or follow additional procedures.
For example, when registering a retail business in Vietnam, you also need to register your retail outlets. Trading companies, on the other hand, require a separate trading license and must also register certain products.
However, note that these procedures will add additional weeks to company registration timeline.
The minimum capital requirement in Vietnam
Vietnam has not set an official minimum capital requirement for most business lines. However, the injected capital must be sufficient for covering your planned expenses.
For example, if you want to set up a manufacturing company and need to build a factory for that, it is unrealistic that you can do it with only US$ 5,000 of minimum capital.
How to test business opportunities in Da Nang
If establishing a legal entity in Vietnam seems too big of a step at first, you can also test the market before making any significant investments.
Emerhub’s outsourced operations model makes it possible.
Some of our services are, for example:
- Employer of record – allows you to hire people in Vietnam without establishing a legal entity
- Importer of record – import products to Vietnam without acquiring any licenses
- Due diligence – we conduct market research to help you make strategic business decisions
Invest in Da Nang
Want to know more about your business opportunities in Da Nang or also other locations in Vietnam?
Reach out to us via the form below. Our consultants will gladly help you find the best market entry strategy for launching your business in Vietnam.