Attorney Vu Manh Quynh is the Managing Partner of ECOVIS Vietnam Law, advising international investors on Foreign Direct Investment (FDI), corporate governance, and regulatory compliance in Vietnam.

Before committing to a factory setup project in Vietnam, foreign investors must answer a core set of strategic questions: Is Vietnam the right location? What market entry structure is available? What will the project realistically take in time, capital and regulatory effort? This section addresses the foundational market entry questions that determine whether a Vietnam manufacturing project is correctly structured from the outset.

This article is Section I of the 100 FAQ about Factory Setup Vietnam series. It covers questions Q1–Q10.

Why is Vietnam a competitive location for foreign manufacturing investment?

Vietnam combines competitive labour costs, a strategic Southeast Asian location, and industrial zones purpose-built for export manufacturing. With 16 free trade agreements in force — including EVFTA and CPTPP — and FDI disbursement reaching USD 25.35 billion in 2024 (GSO Vietnam), Vietnam offers cost, connectivity and preferential market access that few regional alternatives match.

Is 100% foreign ownership allowed in manufacturing in Vietnam?

Yes. The Investment Law 2020 (Law No. 61/2020/QH14) permits 100% foreign ownership in most manufacturing sectors. Restrictions apply only to conditional sectors such as defence-related manufacturing, broadcasting and specific agricultural activities. For general export manufacturing — electronics, textiles, machinery, consumer goods — 100% foreign-owned LLCs or JSCs are the standard structure.

What are the different modes of entry for foreign manufacturers in Vietnam?

The principal modes are: (1) Greenfield investment — establishing a new foreign-invested enterprise (FIE) and building a factory; (2) Acquisition — purchasing equity in an existing Vietnamese manufacturing company; (3) Joint venture — with a Vietnamese partner; (4) Business cooperation contract (BCC) — contractual arrangement without entity formation. Greenfield is most common for manufacturers seeking full operational control.

Which provinces or industrial zones are most suitable for export manufacturing?

Southern Vietnam (Binh Duong, Dong Nai, Long An, HCMC) offers the strongest industrial infrastructure for electronics, automotive and consumer goods. Northern Vietnam (Bac Ninh, Hai Phong, Hanoi) is favoured by Korean and Japanese electronics manufacturers. Central Vietnam (Da Nang, Quang Nam) is emerging for technology and textile manufacturing. Investors should assess industrial park occupancy rates, utility capacity and provincial DPI processing timelines.

What is the realistic timeline from investment decision to factory production start in Vietnam?

For a standard greenfield manufacturing project in an established industrial park, plan for 18 to 36 months from investment decision to first production. This includes: due diligence and site selection (2–3 months); IRC and ERC approval (2–4 months); construction (6–18 months); environmental and fire safety approvals (3–6 months); equipment import and commissioning (2–4 months). Statutory timelines understate actual processing times at the provincial level.

What is the minimum registered capital required for a foreign-invested manufacturing company in Vietnam?

Vietnamese law does not mandate a specific minimum charter capital for most manufacturing sectors. In practice, DPI authorities expect charter capital to represent 20–30% of total investment capital. For SME factories, charter capitals of USD 500,000 to USD 2 million are common. Sector-specific rules may impose minimum capital requirements. Capital must be contributed within 90 days of ERC issuance.

How does Vietnam’s regulatory framework compare to other Southeast Asian manufacturing destinations?

Vietnam offers competitive tax incentives and lower labour costs than Thailand and Malaysia, but a more complex multi-authority approval sequence. The IRC→ERC→EIA→construction permit→fire safety sequence means regulatory sequencing mistakes are more costly than in simpler jurisdictions. Vietnam’s strength is its combination of FTA coverage, deep manufacturing supply chains, and improving infrastructure.

What industry sectors are restricted or conditional for foreign investors in Vietnam?

The Investment Law 2020 defines prohibited sectors (narcotics, wildlife trading) and conditional sectors where foreign investors may enter subject to conditions. Conditional sectors relevant to manufacturing include: printing and publishing, defence-related manufacturing, tobacco production, certain chemical manufacturing, and specific pharmaceutical categories. The full list is in Appendix IV of the Investment Law.

What are the key risk factors foreign manufacturers should assess before committing to Vietnam?

Principal risk factors are: regulatory sequencing risk (sequential approvals that cascade when delayed); provincial DPI processing variability; industrial park land lease risks (termination rights, expansion limitations); labour market tightening in established zones; environmental compliance risk (EIA requirements for certain manufacturing categories are stringent); and currency repatriation risk. A pre-commitment legal feasibility review is standard practice for projects above USD 1 million.

Can a foreign company test the market with a representative office before setting up a factory?

Yes. A representative office (RO) is a permitted structure for market research, liaison and relationship-building. However, an RO cannot engage in direct commercial activities, sign contracts or generate revenue in Vietnam. ROs are subject to their own registration and renewal requirements. For manufacturing projects, an RO can be a useful interim structure while completing site selection and feasibility work — but it does not reduce the IRC/ERC timeline for the eventual manufacturing entity.