Low labor costs among top reasons for businesses interest in Vietnam: survey

The two factors were chosen by 28% of respondents each in a survey published this month in HSBC Global Connections Report.

"Skilled workforce" and "increasing domestic consumer income" got 27% of votes each.

Some 26% said it is a "sizeable market to scale quickly."

"Business decision makers from Chinese and Indian companies are likely to highlight the opportunity to scale quickly in Vietnam’s sizeable market, with 32% and 41% ... pointing to this market attribute."

Indian businesses also pointed to the opportunity to develop and test new products and solutions, with 45% saying this attracted them to the country.

A quarter of all business also saw advantages in Vietnam’s demographics and young population.

Vietnam’s importance in global trade was reflected by the strong interest in free trade agreements, with 63% of companies in the survey intending to make use of the E.U.-Vietnam Trade Agreement, which has the goal of eliminating 99% of tariffs.

The survey polled 3,000 companies with commercial interests in Southeast Asia in July and August.

Of them, 27% (880 businesses) already have operations in Vietnam, and more than half of them are prioritizing growth there over the next two years.

Of firms without operations in the country, 13% are planning to enter in the next two years.

There are also several challenges that make Vietnam less than attractive to foreign investors.

Australian companies were especially likely to say they had dealt with cultural issues, with 40% saying they had faced these in Vietnam.

U.S. (32%) and Hong Kong (34%) firms said adapting to regulations as their primary challenge.

International businesses were generally concerned about a skills shortage.

The biggest barrier to becoming more sustainable was the ability to hire employees with sustainability expertise, according to 37% of respondents.