Thailand Vs. Vietnam to live and do Business
With political turmoil and an increase in corruption within Thailand many expats are now looking to Vietnam. Thailand and Vietnam both sit with a rating of 36/100 (100 being no corruption and 0 being highly corrupt) on the latest Transparency.org Corruption Perceptions Index for 2020. Of note however is that Vietnam has had declining corruption since 2015 while Thailand has been seeing an increase in corruption following the latest military coup in 2014.
As we look at the culture consider that Vietnam has been occupied by both the Chinese and French which has influenced the Vietnamese to some degree. Thailand has never been occupied; however Thailand is still significantly influenced by the west which may in part be due to the large number of western tourists. This is a topic of discussion as tourism from China accounts for the majority of tourists visiting Thailand so the western influence is a topic that can be explored in depth.
Vietnam is definitely going places, however, still has some catching up to do to match Thailand. According to the World Bank Data the GDP of Thailand was 501 Billion US$ in 2020 while that of Vietnam was 271 Billion or 54% that of Thailand. The current growth Forecast for Thailand for the year 2021 has been revised downward a number of times with the latest data, as at the end of August, suggesting that Thailand will see a GDP rise of only 2.2 % in 2021. Vietnam on the other hand has a growth prediction for 2021 is 4.8% growth in GDP. If we extrapolate this that means the GDP for 2021 will be 512 Billion US$ for Thailand and 284 Billion US$ for Vietnam which will then put Vietnam GDP at a level of 55% of Thailand’s. Growing yes, however we still believe a long stretch before Vietnam will overtake Thailand.
Of note however we are seeing expats starting to move. Venture capitalist have been focused on two hot areas in Asean which have been Myanmar and Vietnam. With the recent military coup in Myanmar this has effectively ended Myanmar as a potential area for investment, certainly in the short to midterm. So this now leaves Vietnam. Vietnam is a hotbed for innovation. Vietnam is moving very fast in terms of innovation and digitization of the Vietnam economy vs Thailand. They are doing this also with a younger and larger population. Vietnam has the larger population at ~ 98 million as compared to Thailand’s ~ 66 million. Thailand is mired in bureaucratic issues, dare we say nonsense, and archaic rules and regulations which is slowing down the growth of Thailand. There is no doubt that today Vietnam is a hotbed offering more opportunity for business versus Thailand today, of course depending on what business sector you are focused on.
Infrastructure / Travel and transportation.
Both countries have many direct flights to the major cities however Thailand has more direct flights from international cities. Internal transport in Thailand is much better than Vietnam with respect to roads, busses, trains and internal airports. Due to the huge influx of tourism there is a well-developed system of domestic transfer routes. There is a much better infrastructure within Thailand to get anywhere within the country versus what is seen in Vietnam today. International travel is better. Bangkok is a large hub and one of the biggest airports in SE Asia. This also means that obtaining a visa, such as a tourist visa as an example is faster and easier in Thailand with many countries being serviced with Visa on arrival which is fast and painless stamped at customs upon entry. As a footnote here, with Covid’s impact Thailand has brought in an disproportionate amount of additional paper work for any entry or visa application. Currently getting into Thailand is a bit of a nightmare with added steps such as a Certificate of Entry requirement and new Visa’s all being cut to 90 days instead of the normal 1 or 2 years. As an example a normal one year B1 when applied for is now charged for the full year but issued with a validity of only 90 days. Hopefully Thailand will find a way to adopt more normal processes in coming months.
In Vietnam, once you exit the main cities you will notice a difference versus Thaland regarding the roads and the infrastructure. That is not to say it is terrible but it is a little lagging in comparison. Vietnam does not have as many international airports but the major commerce centers are well serviced so this is not a problem. The visa process for Vietnam, even for tourists is a much more complicated and time consuming process. As a generalization regarding travel alone Thailand is much easier to get to and travel throughout. This in no way implies that Vietnam should be counted out here. If a company is looking to set up manufacturing for export globally then the establishment of facilities in one of the coastal cities such as Haiphong, east of Hanoi, would negate any negative inter country infrastructure failings.
Cost of Living
When you look at the day to day items consumed, pricing is, on average, about 6% higher in Thailand than costs in Vietnam. This may be driven partially through the higher tourism and better transport systems found in Thailand. What is meant here is that Thailand with its healthy tourism sector has developed the connectivity between cities. In Vietnam the main cities are well known, however the large tourism seen in neighboring Thailand is not yet as developed so there is still a disconnect between cities. Overall it can be said that Vietnam is slightly cheaper but will catch up as develop continues. Generally today, everything from taxes, food, dinning, etc. is lower cost versus Thailand, but only marginally less.
Business and Talent
In terms of setting up a business Vietnam is slightly more difficult than Thailand. There are many restrictions with both countries with respect to foreign ownership, what type of business you can set up, and for both countries what sectors you can operate in.
In terms of quality of talent available, again as a generalization, Vietnam offers a better level of educated people and talent to draw from. According to UNESCO’s 2017/8 Global Education Monitoring (GEM) Report, there remain substantial challenges to the quality of education in Thailand: learning outcomes have not improved from 2003-2015 and the country has not published a national education monitoring Report since 2006. According to world education news and reviews Thailand had no fewer than 20 different education ministers over the past 17 years. The education system in Thailand needs to upgrade the education system if it is to advance its competitiveness globally.
For the operations of a business, it is however more difficult to operate a business in Vietnam versus Thailand. Do not assume that means it is easy to operate a business in Thailand, particularly for foreigners, as the reporting rules and tax laws are different from what western companies see as a straight line to common sense. This refers again to the many laws and customs combined with some rather archaic practices. So on a whole both countries have degrees of difficulty that in our opinion puts them almost equal, with Thailand having a small advantage if you happen to operate in one of the sectors Thailand is trying to promote. Outside of that Vietnam and Thailand are on par with Vietnam offering a more stable environment and a slightly better talent pool to draw from.
Both countries offer a great place to base your business and living in. They are different with their own unique set of cultural and business peculiarities. In general Thailand is further down the road in its development and offers a faster integration for any expat staff, but Thailand is hindered in its growth with political instability, the top wanting to maintain control, and military rule in the guise of democracy. The current Junta leader calls it “Thai Style Democracy” where the senate is fully appointed by the military so has the last say in any political matter. Vietnam is the up and comer country so now may be the time to set up shop there. It may be a slightly longer road in Vietnam, it will however be a road that offers less uncertainty.