Why you should open a Construction company in Vietnam
The Vietnam construction market was worth USD 57.52 billion in 2020, and it is expected to grow to USD 94.93 billion by 2026, with a growth rate of more than 8% during the forecast period (2021 -2026).
Furthermore, the construction industry in Vietnam is the best performing in the Asia-Pacific (APAC) region. Despite losing momentum as a result of COVID-19, it has continued to grow rapidly in 2020. According to Vietnam’s General Statistics Office (GSO), construction value-add increased by 5.7 percent year on year in Q3 2020. As a result, the cumulative growth rate for the first three quarters was 5%.
Prior to the Covid-19 outbreak, the industry had grown at a 9.6 percent annual rate over the previous five years (2015–2019). However, construction activities were hampered by the government’s strict measures to contain the virus’s spread, with growth falling below 5% (in the first quarter of 2020) for the first time since the first quarter of 2013.
It is expected to maintain its current growth rate as a result of the government’s efforts to improve the overall quality of the country’s infrastructure through investments in infrastructure construction, tourism infrastructure, and housing projects throughout the country.
In addition, the Vietnamese government’s efforts to close the gap between demand and supply for affordable housing in the country are expected to support market growth.
Conditions for a foreign owned Construction company establishment in Vietnam
The laws of Vietnam and the Schedule have waived restrictions on investment forms and foreign capital. Therefore, foreign investors can establish a foreign-owned construction company in Vietnam to provide construction services with a foreign capital rate of up to 100% of the charter capital.
There are two approaches that a foreign investor can choose from:
Establish a new foreign-owned construction company in Vietnam;
Contribute or buy off capital, shares from an existing Vietnamese construction company.
Because the construction industry has been widely opened to foreign investment, forming a company in this field requires the same minimal requirements as many other unconditional businesses, such as a business address or a resident legal representative.
Read more: 10 steps to open a company in Vietnam.
On the other hand, the purchasing approach also does not deviate from the standard procedure and timeline. A construction company can be easily transferred to a new owner with no additional requirements from DPI (Department of Planning and Investment).
In summary, establishing or owning a construction company in Vietnam is not difficult. The difficulty lies in determining how to run the construction company.
Conditions to operate business in Construction field in Vietnam
In Vietnam, the construction industry is highly regulated. Both domestic and foreign-owned businesses must meet the qualifications and eligibility requirements to carry out construction projects. The Certificate of Eligibility to Execute Construction Projects is the most common certificate obtained by a construction company in Vietnam (CE).
A construction company is not required by law to obtain a CE in order to participate in a project. Usually, the project owners have requested this. The CE is one of the proofs of the contractor’s capability. This is an industry practice, not a regulatory requirement. However, this CE is strictly required for government-owned projects or projects involving infrastructure or industrial construction.
The CE is obtained in accordance with the project scale as defined by Vietnam’s Ministry of Construction. The CE can be assigned to project types 1, 2, 3, 4, or Special, depending on the construction type. Project types 1, 2, and 3 are the most common.
Usually, a newly established company must obtain the lowest-ranked CE tier 3 or 4. Then upgrade into higher tier 2,1 and Special later in the future.
The CE is not always required for main contractors. It means that if your company will be a subcontractor on a project, you will most likely not need to obtain a CE. However, in order to prepare your company for large projects in the long run, it is recommended that the company apply for CE tier 3, then gradually upgrade to Tier 2, 1 and Special. As a result, it is free to participate in any construction project in Vietnam.
Procedures to have a Construction company fully set up in Vietnam
Step 1: Apply for the Investment Registration Certificate
Step 2: Apply for the Business Certificate
Step 3: Make the seal, create the bank account, inject capital
Step 4: Apply for a Certificate of Eligibility to execute construction projects
When step 3 is completed, the company can be considered officially opened. It can, already, start its construction projects which do not require a Certificate of Eligibility.
Applying for a Certificate of Eligibility to execute construction projects (CE)
As previously stated, a Certificate of Eligibility is not required for a Construction company to conduct business in Vietnam. However, this is standard practice in the industry. In Vietnam, this is usually required for the main contractor or for state-owned projects. Obtaining CEs will set the stage for long-term business success.
The general requirements for a CE application can be found below:
Copy of the Business Registration Certificate (BRC);
The list provides working experiences, construction practices, labor contracts of key individuals working in the company;
A declaration on the company’s professional experiences mentioning at least 03 typical latest projects for each registered field;
Declaration on financial capacity; machines, devices, computer software for each registered field;
Task management process; a quality management system for each registered field.
Human resource qualifications and project execution experience are two conditions that most construction companies consider challenging.
Human Resource conditions: In order to be considered qualified, the company’s key personnel must obtain certain professional practice certificates in addition to their relevant university degree. This Professional Practice Certificate is the credential issued by the Government of Vietnam following the completion of a training course and a test result.
The training course and exams are only available in Vietnamese. Companies were put under recruitment pressure as a result of this condition. Aside from the time constraint, it also books a significant budget for training and hiring. To address this issue, a nominee human resource arrangement may be considered. For more information on this approach, please contact VNBG.
Project execution experience: The company is not required to submit proof of experience for the CE tier 3 certification (the lowest rank). However, in order to apply for the higher-ranked CE, it must show evidence of at least three completed projects in the previous tier.
Timeline and Cost to have a Construction company fully opened
Timeline to set up a Construction company: 1-2 months
Timeline to obtain the Certificate of Eligibility: 1-3 months
Setup a Construction company entity
Business address leasing
Resident legal representative hiring (if cannot be arranged)
Capital investment into the company
CE application (including human resource arrangement)
If you want to establish a Construction company in Vietnam or want to know more about the Certificate of Eligibility (EC) to execute construction projects, contact us for a free consultation by filling the form below.
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