Vietnam is one of the few countries in the world where a one-party socialist state presides over one of Asia’s most dynamic market economies. The official term is a “socialist-oriented market economy” — meaning the state controls strategic sectors and sets national development goals, but private enterprise, foreign investment, and competitive markets are now central to growth.
The transition began in 1986 with Đổi Mới (“Renovation”), which dismantled most of the rigid Soviet-style central planning system. Since then, Vietnam has sustained GDP growth averaging 6–7%, joined the WTO, signed multiple free trade agreements, and attracted billions in FDI. But while the policy framework is pro-growth, it’s also layered with bureaucratic complexity, cultural nuance, and an informal economy that’s hard to quantify but impossible to ignore.
1. Understanding the System You’re Entering
Vietnam’s government still sets five-year economic plans and retains ownership in key industries: energy, telecommunications, defense, and certain banking sectors. These state-owned enterprises (SOEs) coexist with a massive private SME sector, foreign-invested companies, and microentrepreneurs.
- Foreign investors often deal with both worlds — negotiating with government-linked corporations for big infrastructure or manufacturing projects, while sourcing suppliers from nimble private firms.
- Regulatory change is constant; policies may be clarified or reversed mid-project. Relationships with regulators matter as much as compliance itself.
2. The Role of Relationships in a Socialist-Market Economy
In a system where both formal rules and informal influence matter, quan hệ — trust-based relationships — is the real currency.
- Deals often begin with a trusted introduction rather than a cold approach.
- Progress is incremental: small collaborations build confidence before larger commitments.
- Relationship-building can mean long lunches, repeated social visits, and attending personal events. Business and personal spheres are more intertwined than in many Western contexts.
Ignoring this dynamic is one of the fastest ways to stall your entry into the market.
3. Women in the Workforce
Women’s economic participation is a defining strength of Vietnam’s labor market. With nearly 70% in the workforce, women are central to both industrial and service sectors, as well as the entrepreneurial landscape.
- Women own or manage a large share of micro and small businesses, particularly in retail, education, food, and hospitality.
- In tech and manufacturing hubs, female engineers and managers are common, though representation thins at the very top.
- Savvy foreign firms actively promoting gender equity can differentiate themselves in recruitment and public perception.
4. Microentrepreneurship as a Market Force
The street vendor selling iced coffee, the tailor running a one-room shop, the online seller shipping via Facebook and Zalo — these are not marginal actors. They form a dense web of low-overhead businesses that can pivot faster than any corporate chain.
- Many operate informally without tax registration, which means no VAT invoices and no formal credit history.
- For B2B players, this creates a dual challenge: reaching them requires informal channels, but scaling requires bringing them into formal supply chains.
- Logistics, digital payments, and microfinancing aimed at this segment are growing sectors in their own right.
5. Cash Still Matters
Digital payment adoption is booming in Hanoi, Ho Chi Minh City, and Da Nang — but cash remains king in much of the economy.
- Small suppliers, rural businesses, and older-generation entrepreneurs may prefer cash for speed and to avoid transaction fees.
- This means bookkeeping can be messy and transparency harder to maintain for foreign partners.
- Hybrid systems (cash for local purchases, bank transfers for formal contracts) are common.
6. Tradition Meets Modern Business Culture
You’ll see a 28-year-old startup founder in jeans and sneakers bow respectfully to a 65-year-old party official in a suit. In the same day, you might negotiate in a boardroom with formal titles, then close the deal in a noisy café over sweet iced coffee.
- Age and status shape interaction; public disagreement is avoided.
- Yet the younger generation is ambitious, collaborative, and increasingly global in mindset.
- The cultural code-switching between tradition and modernity is constant — and essential to navigate.
7. Infrastructure and Industrial Development
Vietnam’s infrastructure buildout is aggressive: industrial parks, upgraded ports, and new highways are expanding capacity for manufacturing and logistics.
- Northern Vietnam is a hub for electronics and textiles; the south focuses on footwear, furniture, and food processing.
- Rural logistics remain a challenge, especially for perishable goods.
- Government incentives target high-tech, renewable energy, and green manufacturing.
8. The Informal Layer in Formal Processes
Vietnam’s legal framework for foreign investment is clearer than it was 20 years ago, but practical navigation still depends on knowing how to get things done in a system where bureaucracy can be opaque.
- A business license might require documents not listed in the official checklist.
- Sector-specific approvals can depend on local-level interpretation of national rules.
- Skilled local legal and accounting partners are indispensable.
9. Expat Adjustment Realities
For expats who relocate, the biggest challenges aren’t just language or food — they’re:
- Navigating a slower, relationship-based pace of decision-making.
- Understanding that “yes” can mean “I hear you” rather than “I agree.”
- Adapting to seasonal rhythms like Tet (Lunar New Year) when business effectively pauses for 1–2 weeks in January. Similar to Japan’s Golden Week, it’s by far the biggest holiday of the year. Many businesses close completely for 5–7 days, but the slowdown starts earlier as staff travel to their hometowns. Factories, offices, and government agencies may not return to full operation for 10–14 days.
Bottom line: those who thrive in Vietnam tend to immerse themselves in local networks rather than relying on expat enclaves.
10. Why Patience and Consistency Pay Off
Vietnam rewards long-term commitment over quick wins. Market entry is not about “getting in fast” but about proving reliability, respecting cultural norms, and building credibility over time. Those who stay the course find a market that is loyal to partners who have earned their trust.
Coming in Part 2:
Capital transfer rules, disclosure requirements, how to start or buy a business, the state of expat entrepreneurship, and which sectors are growing fastest in 2025.
